Fitch Affirms SCOR at 'A+'; Outlook Stable

Wed Apr 30, 2014 12:05pm EDT

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(The following statement was released by the rating agency) PARIS, April 30 (Fitch) Fitch Ratings has affirmed France-based SCOR's Long-term Issuer Default Rating (IDR) and Insurer Financial Strength (IFS) rating at 'A'+ with Stable Outlooks. Fitch has simultaneously affirmed SCOR's junior subordinated debt at 'A-'. A full rating breakdown is available at the end of this commentary. KEY RATING DRIVERS The affirmation reflects SCOR's strong solvency and acceptable debt leverage for its risk profile. SCOR's ratings are also supported by significant business and risk diversification. The ratings also take into account the group's consistent and comprehensive strategy, solid business position, and sound but fluctuating profitability. SCOR has maintained healthy capital adequacy over the past three years, supported by the company's disciplined underwriting and a cautious investment policy. Fitch expects solvency to remain strong. The company's financial leverage ratio slightly deteriorated to an estimated 22% in 2013 from 20% in 2012, largely as a result of the acquisition of Generali US. However, it remains in line with Fitch's expectations for the ratings. Fitch does not expect financial leverage to worsen materially in the coming years. SCOR has successfully expanded its business position through external growth and swift integration of acquired operations. As a consequence, its business position and diversification have significantly improved over the past five years, notably in life reinsurance. Although the cost of SCOR's acquisitions has usually been reasonable, it has contributed to a sizeable share of intangible assets on the group's balance sheet. Nevertheless, the sum is manageable as SCOR has other sources of capital, which themselves are substantial, including subordinated debt and value-in-force. Fitch expects SCOR to continue to adjust its policy terms and conditions to support profitability. Nevertheless, profitability will remain inherently volatile mostly due to exposure to natural catastrophes. Fitch considers that the company's 2013 operating performance has been strong, as illustrated by net income of EUR589m, supported by an one-off gain resulting from its acquisition of Generali US. SCOR's technical profitability improved in 2013. In non-life, its net combined ratio improved further to a strong 94.8% in 2013 as calculated by Fitch from 95% in 2012. Life reinsurance profitability remains resilient with a technical margin broadly stable at 7.2%. Nevertheless, 2013 operating performance has been weakened by lower investment income reflecting the impact of the low interest rate environment on the group's conservative investment policy. RATING SENSITIVITIES A rating upgrade could be triggered by a sustainable profitability track record (combined ratio sustainably below 97%), translating into significant capital accumulation or debt redemption, and by the financial leverage ratio improving to below 22%. Conversely, rating triggers that could result in a downgrade include deterioration in Fitch's assessment of capital adequacy, financial leverage (to above 30%) or profitability (combined ratio sustainably above 103%). The rating actions are as follows: SCOR S.E.: Long-term IDR: affirmed at 'A+'; Outlook Stable IFS rating: affirmed at 'A+'; Outlook Stable Senior unsecured: affirmed at 'A+' Junior subordinated debt: affirmed at 'A-' SCOR Switzerland AG Long-term IDR: affirmed at 'A+'; Outlook Stable IFS rating: affirmed at 'A+'; Outlook Stable SCOR Holding (Switzerland) AG Long-term IDR: affirmed at 'A+'; Outlook Stable The following SCOR entities' IFS ratings have been affirmed at 'A+' with a Stable Outlook: SCOR Global P&C S.E. SCOR Global Life S.E. SCOR Canada Reinsurance Co SCOR UK Co Ltd SCOR Reinsurance Co (US) General Security Indemnity Co of Arizona SCOR Reinsurance Co Asia Ltd SCOR Reinsurance Asia Pacific Pte Ltd SCOR Global Life Americas Re Insurance Co SCOR Insurance (UK) Ltd Contact: Primary Analyst Marc-Philippe Juilliard Senior Director +33 1 4429 91 37 Fitch Ratings S.A.S. 60 Rue de Monceau 75008 Paris Secondary Analyst Martyn Street Senior Director +44 20 3530 12 11 Committee Chairperson Federico Faccio Senior Director +44 20 3530 13 94 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Insurance Rating Methodology', dated 13 November 2013, are available at www.fitchratings.com. Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status null/gws/en/disclosure/solicitation?pr_id=828325 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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