SCOR falls to P&C underwriting loss on catastrophes, Ian, reserve strengthening

Global reinsurance company SCOR has reported a net loss for the first nine months of 2022 across its business of EUR -509 million, with its P&C business particularly affected by natural catastrophe losses, hurricane Ian and reserve strengthening in the third-quarter.

SCOR’s P&C reinsurance unit has been hammered by catastrophe claims of EUR 517 million in Q3 2022, with a total of EUR 907 million for the year-to-date.

EUR 279 million claims are related to hurricane Ian, while the reinsurance firm also added EUR 113 million to the cost of convective storms and hailstorms in France from June, taking that event to losses of EUR 166 million.

On top of this, SCOR said that it has strengthened its P&C reserves by EUR 485 million (which is 2.3% of the EUR 21.5bn net P&C reserves held), which the company says is to “take a prudent stance in a claims environment marked by high economic and social inflation.”

Positively, the reinsurance firm has grown its overall gross written premiums by 6.2% over the first nine months of 2022, to EUR 14.827 billion.

In P&C reinsurance, SCOR has continued to reduce its peak catastrophe exposures, through selective underwriting, but at the same time has still expanded its gross written premiums by 15.8% at constant exchange rates, to reach EUR 7.463 billion.

However, the P&C reinsurance net combined ratio is elevated at 119.5% for the first nine months of 2022 and 141.4% for Q3 2022, implying significant underwriting losses.

SCOR explained that over the nine months, this has been elevated by a nat cat ratio of 15.9% and a higher attritional loss and commission ratio of 97.5%, driven by higher man-made losses.

The EUR 279 million hurricane Ian loss is based on an industry estimate of $70 billion, SCOR said.

On the reserve strengthening, SCOR explained that the EUR 485 million strengthening is largely due to an upward review of economic inflation assumption across the book and the review of key latent exposures.

SCOR noted that its net market share for hurricane Ian losses was below other previous catastrophe events at roughly 0.4%, reflecting its pruning of catastrophe exposures, especially in the United States.

Previously, SCOR took a 1.3% share of hurricane Michael losses in 2018, and around 1% of hurricane Irma in 2017.

Looking further into SCOR’s results disclosures, the P&C reinsurance division gross technical result was EUR -915 million for the nine months and EUR -958 million for the third-quarter of 2022.

In the third-quarter, it appears SCOR’s retrocessional reinsurance program delivered some positive benefits, likely due to hurricane Ian and perhaps the increase in loss expectations for the French storms.

SCOR’ reported a positive net result of retrocession in Q3 2022 as EUR 244 million, while for the nine months it was EUR 148 million.

Which helped reduce the gross technical result to a net technical loss of EUR -714 million for Q3.

SCOR’s leadership said that after a disappointing quarter it will accelerate actions to restore profitability.

Denis Kessler, Chairman of SCOR, said, “In light of the Group’s disappointing results, the Board of Directors asked the management team to accelerate the implementation of strong measures to strengthen SCOR’s technical profitability and improve its operational performance. The Board will ensure that these measures are implemented with determination. This will enable the Group to take full advantage of the positive development in the P&C reinsurance market in terms of rate increases and tightening of terms and conditions.”

Laurent Rousseau, Chief Executive Officer of SCOR, added, “The quarter has been difficult, and the results are significantly below the Group’s expectations. Our short-term priority is the restoration of our financial performance. The Group has already taken meaningful actions to improve its performance, reduce its exposure to Natural Catastrophes, and prudently reserve the combined effects of social and economic inflation. But these Q3 results demonstrate the need to go further and continue taking strong actions to remediate the Group’s underwriting performance and restore its profitability.

“The hardening of the P&C market, the increasing demand for life reinsurance products and the increase in interest rates are drivers that should favor positive developments for reinsurers. I am confident that we are building from a sound base to navigate in the new environment and take advantage of market tailwinds.”

In P&C reinsurance, SCOR said it plans to “strengthen its reinsurance franchise,” and to aim for “sustainable performance across the cycle,” while also aiming to “make the most of the hardening reinsurance market.”