SCOR 1st Half Net Profit Down 58% to €21 Million – In Talks with Gerling

September 4, 2002

SCOR, France’s largest reinsurer, reported that its 1st half net income had dropped 58 percent to € 21 million* from € 50 million* in the same period last year, due to the now familiar problem of declining equity values.

The company also revealed that it was in talks with Germany’s Gerling Group “with a view to a possible acquisition of the Group’s Life and certain of its Non-Life reinsurance activities.” At a press conference in Paris to discuss the company’s results, Chairman and CEO Jacques Blondeau confirmed SCOR’s interest, but made it clear that any acquisitions would have to provide additional earnings immediately.

Although the company’s overall revenues rose 5.6 percent (16 percent at constant exchange rates) from €2.36 billion* to €2.51 billion* and operating profit, excluding capital gains and losses rose 88 percent to €79 million*, SCOR wrotedown around €83 million* in its investment portfolio in recognition of the depressed equity values.

SCOR’s announcement, prepared by Blondeau, stated that “Results for the first-half are beginning to reflect the strong recovery of worldwide reinsurance markets and meet objectives, despite a financial crisis unmatched in over fifty years.”

Blondeau indicated that SCOR’s strategy for 2002 continues on course. He described the three main courses of action as follows:
• Withdrawal from activity which generates insufficient return (Program Business, Health, US Bonds).
• Reduction or temporary halt in underwriting certain business lines linked to the highly deteriorated 2002 economic and financial environment (Non Traditional Reinsurance and Credit Derivatives.)
• Acceleration of our growth in sectors which are benefiting from the higher price increases and improved technical conditions (Property & Casualty Reinsurance and Large Corporate Accounts).

“Growth figures confirm that our results are in line with our stated objectives, and are even surpassed in property business,” said the announcement. As far as the future’s concerned, SCOR joined other insurers in expressing concern about the “the level of security impairment reserves recorded in the first half and uncertainties about the evolution of financial markets.” While the company said it had “taken the measures to mitigate this impact,” if current market conditions continue it would “make it difficult to forecast our full results for 2002.”

It concluded that, “the significant improvement of technical results should be confirmed over the second-half of the year. The operating result, barring any major event, should also increase quite significantly compared to the first-half of 2002.” One “major event” that will impact SCOR’s earnings are the recent floods in eastern Europe. The company announced separately that it expects the cost to be between €40 and €50 million after tax.

* Editor’s Note:
The euro is currently trading at .9968 to the dollar, essentially at parity; therefore dollar and euro amounts are virtually the same.

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