July 17, 2017 / 3:44 PM / in 6 months

Fitch Affirms SCOR at IFS 'AA-'; Outlook Stable

(The following statement was released by the rating agency) LONDON, July 17 (Fitch) Fitch Ratings has affirmed SCOR SE's Insurer Financial Strength (IFS) Rating at 'AA-' (Very Strong) and Long-Term Issuer Default Rating (IDR) at 'A+'. Fitch has also affirmed the ratings of SCOR's core operating subsidiaries. The Outlooks are Stable. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS The affirmation reflects SCOR's very strong business profile, reinsurance franchise, financial performance and capitalisation. Fitch regards SCOR as having the scale, diversity and financial strength to attract the highest quality business being placed into the global reinsurance market. This should provide high resilience to softening pricing conditions that are being reported across several reinsurance classes. Fitch maintains a favourable view of SCOR's property & casualty (P&C) reinsurance business, which has steadily grown into a well-diversified portfolio, both geographically and by line of business. The combined ratio normalised for reserve variations and major losses stood at 94.4% at end-2016, reflecting the effects of a protracted soft market. This increases the sensitivity of future underwriting profitability to even a modest rise in major loss claims. Life reinsurance is a significant part of SCOR's business, at least in premium terms. Successful management of the in-force book, coupled with continued organic growth, is viewed as key to diversifying group profitability. SCOR scored 'Extremely Strong' on Fitch's Prism Factor-Based Model (FBM) at end-2016. A qualitative offset to the overall score achieved is the high proportion of softer forms of capital present within the assessment. SCOR reported strong coverage of the Solvency II (SII) solvency capital requirement (SCR) at 31 December 2016, with a level of 225% sitting marginally above the reinsurer's stated optimal range. SCOR completed the calls of two issues of hybrid debt in 2016 - EUR350 million subordinated notes redeemed in July and CHF650 million subordinated notes redeemed in August 2016. The redemptions were pre-financed by the issuance of two subordinated notes in October 2014 and December 2015. Fitch recognises that the current operating environment remains challenging for SCOR and the wider (re)insurance industry. Persistently low interest rates and increasingly intense competition, especially in non-life reinsurance, continue to drive price softening across certain major reinsurance classes. The agency expects SCOR's diversified business profile and prudent underwriting policy to provide resilience against these market conditions. RATING SENSITIVITIES A downgrade may occur if financial leverage rises and remains over 25% or if Fitch's capitalisation assessment, as measured by the FBM score, deteriorates to 'Strong'. A combined ratio consistently above 100%, or net income return on equity consistently below 6%, could also lead to a downgrade. An upgrade is considered as unlikely in the near term, but could be achieved over the longer term if financial performance (including a run-rate combined ratio remaining below 93%) improves, if SCOR's market position strengthens relative to peers, and if the quality of SCOR's capitalisation, as assessed by Fitch's Prism FBM, improves. FULL LIST OF RATING ACTIONS SCOR S.E.: IFS Rating: affirmed at 'AA-'; Outlook stable Long-Term IDR: affirmed at 'A+'; Outlook Stable Senior unsecured debt: affirmed at 'A+' Subordinated debt: affirmed at 'A-' SCOR Switzerland AG IFS Rating: affirmed at 'AA-'; Outlook stable Long-Term IDR: 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 'AA-' with 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 SCOR Global Life Reinsurance Ireland Limited Contact: Primary Analyst Graham Coutts Director +44 20 3530 1654 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Harish Gohil Managing Director +44 20 3530 1257 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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