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S&P Global Ratings Inc. on Thursday lowered the financial strength rating on Scor SE and its core subsidiaries and guaranteed entities to 'A+' from 'AA-' with a stable outlook.
Scor’s operating performance has not met expectations or kept in line with that of 'AA-' rated peers, with the trend accelerating in the first nine months of 2022, partially due to the challenging price environment in the P/C business prior to 2022, elevated natural catastrophes, volatile technical margins from the life reinsurance business, and lower investment income, S&P said.
The ratings agency added that Scor reported a net loss of €509 million for the first nine months of 2022, making it a “negative outlier relative to close peers such as Munich Re and Hannover Re, which have a better track record of meeting our earnings expectations.”
The stable outlook reflects the expectation that management actions will likely return the group to underwriting and overall profitability in 2023, S&P said.
Management steps to improve weaker earnings include reducing exposure to natural catastrophes, which will come down about 20% by year-end 2022 versus 2021, and U.S. property. SCOR has also “desensitized” itself to inflation by strengthening its P/C reserves by €485 million, S&P said.
“We expect Scor’s underwriting results will improve in 2023-2024 due to benefits from hardening reinsurance pricing, with a combined ratio (loss and expense) of 95%-98% including a natural catastrophe load of eight percentage points,” S&P said.