Best Upgrades SCOR & Subs Credit Ratings; Affirms Financial Ratings

May 3, 2012

A.M. Best Europe – Ratings Services Limited has upgraded the issuer credit ratings (ICR) to “a+” from “a” and affirmed the financial strength rating (FSR) of ‘A’ (Excellent) of French reinsurer SCOR SE and its main subsidiaries. Best also upgraded SCOR’s subordinated debt ratings.

The outlook for all of the ratings is stable.

The upgrade of SCOR’s ICRs reflects its “resilient performance in challenging market conditions, demonstrating strong enterprise risk management, particularly pertaining to investment risk management and prudent capital management,” Best explained. “SCOR’s risk-adjusted capitalization continues to remain resilient, with its balance between life and non-life reinsurance providing sound diversification and stability to earnings. Additionally, SCOR has further strengthened its global reinsurance presence during 2011, creating a sound platform to further expand its franchise.”

Best also noted that SCOR has demonstrated “resilient risk-adjusted capitalization and prudent capital preservation in a challenging market environment. The use of insurance linked securities [ILS] in the form of an event-driven guaranteed equity (contingent capital facility) and Atlas VI catastrophe bond have assisted in protecting and reducing volatility in the company’s capital base during 2011.”

In addition Best indicated that SCOR is successfully integrating the Transamerica Re (TARe) life portfolio into its operations, “raising debt to the amount of CHF 650 million [$711 million] to support the acquisition in 2011.

“TARe has further strengthened SCOR’s worldwide franchise as a leading reinsurance company with the strength of a balanced profile between life and property and casualty, providing a well-diversified portfolio.”

Best pointed out that while SCOR has “maintained a strong position in European markets, the recent advances in the life reinsurance segment has made SCOR a prominent player in the United States. SCOR continues to implement its strategic plans, concentrating on core life biometric risks, with reduced exposure to investment-related products. In addition, property and casualty has shown promising developments following successful January and April renewals, with overall price increases, particularly for catastrophe-related business.

“SCOR’s underwriting results are very much dictated by its robust and solid track record on life reinsurance, where it has achieved an improved operating margin of 7.8 percent. Conversely, property and casualty results have suffered in 2011 as a result of catastrophe losses, mainly from the Japan earthquake and Thai floods, contributing 18.4 percent to the combined ratio of 105 percent. With improving attritional loss experience, catastrophe losses are likely to add volatility to prospective overall earnings.”

Best reemphasized that SCOR’s risk management “has demonstrated strength over recent years, utilizing suitable insurance linked securities for capital preservation, in addition to prudently managing its investment portfolio, effectively de-risking from risky asset classes, as demonstrated by its minimal exposure to current euro zone government debt and diversified corporate bond portfolio.

“Upward rating pressure could arise if there is a material strengthening of risk-adjusted capitalization and operating performance remains robust through market cycles. Downward rating pressure could occur if there is a material reduction in risk-adjusted capitalization or deterioration in operating performance.”

Best summarized its rating actions on SCOR and its subsidiary companies as follows:
The ICRs have been upgraded to “a+” from “a” and the FSR of’ ‘A’ (Excellent) has been affirmed for SCOR SE and its following subsidiaries:
— SCOR Global Life SE
— SCOR Global P&C SE
— SCOR Switzerland AG
–SCOR UK Company Limited
— SCOR Reinsurance Asia-Pacific Pte Ltd

The FSR of ‘A’ (Excellent) and ICR of “a” of SCOR Rueckversicherung
(Deutschland) AG have been withdrawn following the integration into SCOR Global Life SE.

The following subordinated debt ratings have been upgraded:
— to “a-” from “bbb+” on €100 million [$131.5 million] subordinated step-up notes, due 2020
— to “a-” from “bbb+” on $100 million subordinated step-up notes, due 2029
— to “a-” from “bbb+” on €350 million [$460 million] 6.154 percent undated deeply junior subordinated notes
— to “a-” from “bbb+” on €50 million [$ 65.75 million] subordinated step-up notes issued by Société d’Etudes et de Placements Financiers and guaranteed by SCOR, due 2049
— to “a-” from “bbb+” on CHF 650 million [$711 million] 5.375 percent undated deeply subordinated notes

Source: A.M. Best

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