Fitch Revises SCOR's Outlook to Positive; Affirms at 'A+'

Wed Aug 20, 2014 10:17am EDT

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(The following statement was released by the rating agency) PARIS/LONDON, August 20 (Fitch) Fitch Ratings has revised France-based SCOR S.E.'s Outlooks to Positive from Stable. Its Long-term Issuer Default Rating (IDR) and Insurer Financial Strength (IFS) rating have been affirmed at 'A+'. Fitch has simultaneously affirmed SCOR's subordinated debt at 'A-'. A full rating breakdown is available at the end of this commentary. KEY RATING DRIVERS The Outlook revision reflects SCOR's improved profitability, as well as strong solvency and financial 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, cautious investment policy and solid business position. The company's operating performance has improved over the past 18 months, as illustrated by net income of EUR256m in 1H14, up from EUR189m in 1H13. SCOR's technical profitability also improved over the same period. In non-life, its net combined ratio improved further to a solid 90.9% in 1H14 from 94.3% in 1H13 with no material reserve release. Life reinsurance profitability remains resilient with a technical margin broadly stable at 7.2%. The earnings improvement also resulted in a stronger fixed charge coverage ratio of 9.8x at end-2013. Fitch expects SCOR to continue to adjust its policy terms and conditions to support profitability. Nevertheless, profitability will remain inherently volatile, mostly due to its exposure to natural catastrophes. In addition, operating performance remains constrained by lower investment income, reflecting the impact of a low interest rate environment on the group's conservative investment policy. 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. Nevertheless, 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. Yet, the sum is manageable as SCOR has other sources of capital, which themselves are substantial, including subordinated debt and value-in-force. The total financing and commitments ratio (TFC), a comprehensive measure of debt-related leverage including essentially all financing activities, remains above average at 1.0x. The company's financial leverage ratio improved slightly to an estimated 21% at end-1H14 from 22% at end-2013, largely due to increased shareholder's funds, and is viewed as strong for the ratings. Fitch does not expect financial leverage to deteriorate 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. RATING SENSITIVITIES A rating upgrade could be triggered by a sustained track record of profitability, demonstrated by a combined ratio and fixed charge coverage ratio consistent with levels reported at end-2013. Alternatively, an upgrade could result from maintaining a final Prism Factor-Based Model score consistent with a 'AA' category rating, or from the TFC ratio falling below 0.8x. The rating actions are as follows: SCOR S.E.: Long-term IDR: affirmed at 'A+'; Outlook revised to Positive from Stable IFS rating: affirmed at 'A+'; Outlook revised to Positive from Stable Senior unsecured debt: affirmed at 'A+' Junior subordinated debt: affirmed at 'A-' SCOR Switzerland AG Long-term IDR: affirmed at 'A+'; Outlook revised to Positive from Stable IFS rating: affirmed at 'A+'; Outlook revised to Positive from Stable SCOR Holding (Switzerland) AG Long-term IDR: affirmed at 'A+'; Outlook revised to Positive from Stable The following SCOR entities' IFS ratings have been affirmed at 'A+'. The Outlooks have been revised to Positive from Stable. 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 Chris Waterman Managing Director +44 20 3530 11 68 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@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 here 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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