Best Affirms SCOR and Subs ‘B++’ Ratings; Changes Outlook to Positive

A.M. Best Co. announced that it has affirmed the financial strength rating of “B++” (Very Good) of French reinsurer SCOR and its core subsidiaries (collectively referred to as SCOR Group) and has assigned an issuer credit rating (ICR) of “bbb+” to these companies.

Best said the newly assigned ICR reflects its opinion concerning SCOR’s financial strength, as “expressed in the credit market scale.” Best added that the “senior and subordinated debt instruments issued or guaranteed by SCOR have been upgraded. The rating on SCOR’s commercial paper programme has been affirmed.”

The rating agency also announced that “the outlook for all these ratings has been changed to positive from stable, largely reflecting the impact of its commutations agreed in 2004, which are part of SCOR’s continuing programme of risk profile reduction.”

Best also noted that it has assigned a financial strength rating of “B++” (Very Good) and an issuer credit rating of “bbb+” to SCOR Vie (Paris), which it considers a core subsidiary of SCOR. The outlook for these ratings is also positive.

SCOR’s ratings “reflect its very good current risk-adjusted capitalisation, which is likely to remain stable as a consequence of its improved earnings and ongoing efforts to reduce non-life premiums and run-off claim reserves,” Best said. “The overall quality of capital is also improving due to the reduced proportion of “soft” capital (i.e., life deferred acquisition costs and value of business acquired).”

However, Best also indicated that it believes SCOR’s capitalization “remains negatively affected by potential further adverse development in its reserves (in particular, French motor, U.S. general liability and programme and workers’ compensation business). This volatility will likely be reduced somewhat by the recently agreed commutations.”

The rating agency noted; “SCOR’s consolidated net income continues to improve, and A.M. Best anticipates that it will most likely reach approximately 85 million euros ($108 million) at year-end 2004.” Best also said that over the next two years it expects “non-life underwriting profitability will benefit from reduced expenses (expense ratio likely to decrease to approximately 30 percent) and a stable loss ratio (approximately 70 percent). Current excellent life technical profitability will remain stable as the company reduces its underwriting of non-proportional covers.

“SCOR maintains a very good business profile in its core markets, mainly in Europe, and to a lesser extent in Asia. Best also indicated that it is currently reviewing the “core” status of SCOR’s U.S. and Canadian non-life companies: (SCOR Reinsurance Company, General Security National Insurance Company, General Security Indemnity Company of Arizona and SCOR Canada Reinsurance Company).”

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