S&P affirms SCOR’s ‘A+’ ratings with stable outlook despite L&H profit warning
Despite profit warning and a drop in capitalisation, S&P Global Ratings has affirmed its ‘A+’ long-term insurer financial strength and issuer credit ratings on SCOR SE and related core subsidiaries. The outlook remains stable.
The rating agency restated its expectations on capital and earnings as a result of SCOR’s decision to accelerate the annual life and health (L&H) reserving assumptions review following the negative experience variance in the first quarter of 2024.
SCOR, a French P&C and Life reinsurer, experienced a drop in its L&H contractual service margin of up to €1.3 billion and a restatement of its 2024 L&H insurance service result expectation to breakeven instead of €500 million.
Although this leads to a reduction in its assessment of available capital, S&P’s overall view of the capital adequacy remains redundant at the second-highest confidence interval (99.95%).
From a regulatory perspective, the rating agency expects the reinsurer’s solvency ratio will remain comfortably within the target range of 185%-220% over 2024-2026.
S&P will continue to closely monitor the ongoing L&H reserving assumption review and SCOR’S corresponding internal control remediation.
As it believes that the reinsurer’s management continues to strengthen the company’s controls, its assessment of the group’s overall governance credentials remains unchanged.
At the same time, S&P noted that it will also assess if the new L&H business strategy planned for the end of 2024 will impact its base-case assumptions as regards the L&H business’ contribution to the group risk profile.
SCOR’s stable outlook reflects S&P expectation that results will stabilise and remain solid in 2025-2026 and SCOR will maintain its market positions in L&H and P/C reinsurance, the rating agency also stated.
S&P could lower SCOR SE’s current rating by one notch if the reinsurer’s earnings are volatile and lower than peers’ with similar diversified risk profiles or if the company were to experience further unexpected reserve strengthening measures.
It could also lower the rating if the company’s capital adequacy drops below our 99.95% confidence level over a prolonged period or if it sees signs of risk control deficiencies for key risks.
In view of the lower-than-expected profits for 2024 and the lack of earnings’ track record that consistently exceed those of similarly rated peers, S&P does not see e upside potential for SCOR in the next two years.
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