Best’s News & Research Service - October 01, 2014 12:50 PM (EDT)
A.M. Best Affirms Ratings of SCOR SE and its Main Subsidiaries
London //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a+" of SCOR SE (SCOR) (France) and its main subsidiaries. Concurrently, A.M. Best has affirmed the existing debt ratings issued by SCOR. The outlook for all ratings is stable.
A.M. Best has also assigned a debt rating of "a-" to the CHF 125 million 3.375% undated subordinated fixed to floating rate notes issued by SCOR SE on September 24, 2014 and a debt rating of "a-" to the EUR 250 million 3.875% undated subordinated fixed to floating rate notes issued by SCOR SE on September 25, 2014. The outlook assigned to both debt ratings is stable.
The ratings of SCOR reflect its strong competitive market position, well diversified operations, resilient overall earnings, excellent risk management and robust risk-adjusted capitalisation.
SCOR has strengthened its competitive position within the global reinsurance market over recent years
through organic growth of its non-life operations and acquisitions of U.S.-based life reinsurance portfolios. The
group has established a strong global franchise that offers a wide range of reinsurance products. Furthermore, its operations are evenly balanced between life and non-life functions. This strong business profile allows SCOR to effectively manage local and global reinsurance market cycles, and is expected to be particularly beneficial over the coming years as the industry confronts an increasingly challenging operating environment.
Underwriting profitability has gradually improved over recent years and was at a good level during 2013 and through the first half of 2014. For the first six months of 2014, SCOR reported a combined ratio of 90.9% for
its property/casualty reinsurance business, which is 3.4 percentage points lower than for the same period in 2013. Contributing to SCOR's solid technical performance has been an improving attritional loss ratio and relatively benign catastrophe experience. SCOR's life operations have generated a relatively consistent technical margin (return on net earned premiums) over recent years of more than 7%. SCOR's life business, which is focused on mortality risks, generates positive cash flows and is performing well on a market consistent embedded value (MCEV) basis, with total MCEV earnings of EUR 568 million in 2013.
SCOR's level of risk-adjusted capitalisation has gradually improved over recent years and is expected to remain supportive of the current rating level. Capital requirements are principally driven by underwriting activities (premium and reserving risks), with the group maintaining a conservative investment portfolio. SCOR has developed an excellent risk management framework and has fully integrated sophisticated capital management tools into its operations and strategic decision-making process. The group has a strong level of financial flexibility and effectively utilises several different forms of capital, including hybrid debt instruments. SCOR's financial leverage is in line with its rating level and the debt issued in September 2014 is expected to be used for refinancing existing debt and general corporate purposes.
Although SCOR sits comfortably within its current rating level, upward rating movement could arise
through management actions to maintain the current level of risk-adjusted capitalisation coupled with a continued strong operating performance through challenging market conditions. Downward rating pressure could arise from a material reduction in risk-adjusted capitalisation or a prolonged deterioration in profitability.
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
- SCOR Global Life Reinsurance Ireland Limited
The following debt ratings have been affirmed:
SCOR SE--
- "a-" on EUR 100 million subordinated step-up notes, due 2020
- "a-" on USD 100 million subordinated step-up notes, due 2029
- "bbb+" on EUR 350 million 6.154% undated junior subordinated notes
- "a-" on CHF 650 million 5.375% undated subordinated notes
- "a-" on CHF 315 million 5.25% undated subordinated notes
- "a-" on CHF 250 million 5.00% perpetual subordinated notes
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Analyzing Contingent Capital Facilities
- Catastrophe Analysis in A.M. Best Ratings
- Equity Credit for Hybrid Securities
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR - A.M. Best's Capital Adequacy Ratio for Insurers
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure .
This rating announcement has been issued by A.M. Best Europe - Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.