In a bulletin released today France’s Scor SA, the world’s 7th largest reinsurer, announced that it expects to post a 400 million Euro ($404 million) loss for the full year, following a net loss of 425 million ($429.5 million) for the first nine months, but recovery plans are well under way.
New CEO Denis Kessler, who succeeded Jacques Blondeau earlier this month (See IJ Website Nov. 5), has lost no time in taking charge. The financial review he ordered has already been completed, and he’s already putting measures in place designed to bring Scor back to profitability in 2003.
“After being appointed Chairman of the Group on 4 November 2002, I requested an examination of the Group’s situation and its future prospects,” Kessler stated.
My request applied:
– to the past, taking full account of the studies carried out by external actuaries and a detailed review of the third-quarter accounts for 2002,
– to the present, with an in-depth study of the Group’s balance sheet, its assets and net worth,
– and to the future, by adjusting our business objectives and the initial measures required to implement a recovery plan and launch our rights issue.
The findings of this in-depth review were presented to the Board of Directors on 15 November, after which the Board decided to act immediately to restore confidence in our Group and return it as quickly as possible to profitability.”
He characterized the measures as a “vigorous recovery plan” that would be put into immediate effect. “It refocuses underwriting activities on products and regions that should quickly return the Group to profitability. Scor also plans to raise between 350 million and 450 million Euros ($353.5 and $454.5 million) through a rights issue that would more than double the company’s existing market capitalization.
The bulletin described in detail the steps Scor has taken to reassess its potential liabilities. Following a thorough review by accountants in Europe, the U.S. and Canada, it announced that it has increased reserves in the U.S. by 154 million Euros ($155.54 million), which bring the total to 2.6 billion Euros ($2.626 billion), mainly to cover the period 1998-2001.
It will also increase reserves by 141 million Euros for Commercial Risk Partners, raising its total reserves to 1.2 billion Euros ($1.212 billion), mainly to cover prospective finite risk contracts for workers’ compensation in 1999 and 2000. 30 million Euros ($30.3 million) will be added to its Credit and Surety business, to reach a total reserve of 435 million Euros ($439.35 million), and another 15 million Euros ($15.15 million) will be added to cover asbestos and pollution risks, raising total reserves in this category to 159 million Euros ($160.6 million).
The extensive plan, conceived as rates are rising sharply, calls for cuts of up to 10 percent in Scor’s underwriting activity, more than 600 million Euros ($606 million) next year, and a more selective approach to underwriting. Basically it aims to use its capital in areas that are the most profitable, and to cut less profitable operations.
It also envisions cutting overhead by around 15 percent over the next two years in order to improve efficiency.
“Putting SCOR back on the right track is at the heart of the recovery plan. This plan has been approved by the Board, which has assured me of its full support, and the whole management team is fully committed to its implementation. The forthcoming rights issue will provide the means to achieve the plan’s objectives. We will then need to deliver in the weeks and months to come. And we shall,” Kessler concluded.
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