Best Europe Affirms SCOR and Main Subs Ratings; Outlook Stable

October 11, 2013

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

Best also affirmed the existing debt ratings guaranteed or issued by SCOR and assigned a debt rating of “a-” to the CHF 250 million [$275.5 million] 5 percent perpetual subordinated notes issued by SCOR in September 2013. The outlook for all ratings is stable.

The ratings reflect SCOR’s “very strong business profile, resilient overall earnings, excellent risk management and robust risk-adjusted capitalization,” Best said. “During 2012 and 2013, SCOR’s competitive market position strengthened following organic growth in its key European and emerging markets, as well as through a strategic acquisition in the United States. SCOR maintains an excellent profile in the global reinsurance market with a diverse book evenly split between both life and non-life segments and by territory.”

In addition Best noted that “strong organic growth of SCOR’s non-life operations has been complemented by the integration of Transamerica Re’s life portfolio (acquired in 2011) and the recent acquisition of Generali USA Life Reassurance Company (GULRC) [renamed SCOR Global Life USA Reinsurance Company] (acquired in October 2013). SCOR has a number of strategic initiatives underway that if successful should further strengthen its profitability and enhance its position as a leading global reinsurance company.

“SCOR’s underwriting profitability has been driven by the strong and stable performance of its life business, which has generated an average profit margin of above 7 percent over the past three years. While there has been a gradual improvement in SCOR’s attritional loss ratio for its non-life business, volatility is created by SCOR’s exposure to natural catastrophe events.”

Best indicated that “for 2013, SCOR is on target to achieve a combined ratio of approximately 95 percent, with catastrophe and attritional losses currently remaining within budget. While SCOR has de-risked its investment portfolio through an emphasis on high quality liquid assets, returns remain low due to global market conditions. SCOR has positioned its portfolio to react quickly to changing market conditions.”

Best also said: “SCOR has developed a strong enterprise risk management framework, which has served the company well in a challenging market environment. The group’s internally developed risk-based capital model is actively used by senior management to make strategic decisions.”

As a result Best said SCOR’s prudent capital management gives it “comfort with the company’s level of risk-adjusted capitalization, which is adequate for its current rating level. Maintaining and improving risk-adjusted capitalization is likely to be a key challenge for the company’s management over the coming years as SCOR expands its franchise further.

“While the recently acquired GULRC operations reinforce SCOR’s very strong position within the US life reinsurance market, there are material execution risks to overcome before the business becomes fully integrated.

“The transaction is supported by SCOR’s ability to successfully access capital markets; the group raised debt in the amount of CHF 250 million in September 2013. SCOR’s financial leverage and interest coverage ratios are expected to remain within Best’s tolerance at the current rating level.”

In conclusion Best said that although SCOR “sits comfortably within its current rating level, upward rating movement could arise through the material strengthening of risk-adjusted capitalization coupled with a continued strong operating performance through the market cycle. Downward rating pressure could arise through a significant reduction in risk-adjusted capitalization or a prolonged deterioration in profitability.”

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

The following debt ratings have been affirmed:
SCOR SE—
— “a-” on €100 million [$135.8 million] subordinated step-up notes, due 2020
— “a-” on $100 million subordinated step-up notes, due 2029
— “a-” on €350 million [$475 million] 6.154 percent undated junior subordinated notes
— “a-” on CHF 650 million [$716 million] 5.375 percent undated subordinated notes
— “a-” on CHF 315 million [$347 million] 5.25 percent undated subordinated notes

The following debt rating has been assigned:
SCOR SE—
— “a-” on CHF 250 million [$275.5 million] 5 percent perpetual subordinated notes

A.M. Best Co. has also affirmed the FSR of ‘A’ (Excellent) and the ICRs of “a+” for the following North American property/casualty subsidiaries of SCOR SE:
• SCOR Reinsurance Company
• SCOR Canada Reinsurance Company
• General Security National Insurance Company
• General Security Indemnity Company of Arizona

Source: A.M. Best Europe

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