SCOR reports P&C underwriting loss but retrocession eases catastrophe impact

French insurer and reinsurer SCOR has reported a net combined ratio of 113.2% for its global P&C business in 2022 on the back of a high nat cat ratio, although its results show that the firm’s use of retrocession again helped to alleviate some of the burden of another year of high losses.

The SCOR Global P&C underwriting division has seen its net combined ratio deteriorate from 100.6% in 2021 to 113.2% in 2022, which the firm mostly attributes to a high natural catastrophe ratio of 12.4% of net earned premiums, of which 3.5% relates to Hurricane Ian.

At the same time, the attritional loss ratio increased from 81.5% to 94.6% year-on-year, mostly as a result of the EUR 485 million SCOR P&C reserve increase revealed in the third quarter, as well as the EUR 86 million provision related to the war in Ukraine, and the EUR 204 million loss related to the drought in Brazil.

However, the company’s results show that retrocession had a positive benefit of EUR 181 million in P&C in 2022, which is in line with the EUR 189 million benefit seen in 2021, and likely related to Hurricane Ian and other catastrophe events.

In its L&H business, SCOR has reported that retro had a substantial positive benefit of EUR 731 million in 2022, although this is lower than the positive net result of retro of EUR 1.668 billion in 2021.

So, while the reinsurer’s P&C combined ratio deteriorated year-on-year, it appears it would have been higher were it not for the firm’s use of retro, while the L&H division’s net technical result would have been lower.

All of this shows the importance of retrocession in reducing volatility for SCOR.

Nevertheless, SCOR continued to expand its P&C book in 2022 with gross written premiums (GWP) rising by almost 22% to more than EUR 10 billion in 2022. The company says that it continues to benefit from attractive market conditions, enabling it to accelerate the repositioning of its P&C portfolio.

As a result, specialty lines growth was strong at 17.5% with the segment now accounting for 28% of the reinsurer’s P&C GWP. The treaty global lines revenues grew 20.7% on the back of new business and supportive reinsurance market dynamics.

SCOR has also commented on its experience at the January 1st, 2023, reinsurance renewals, where in P&C reinsurance the market continues to harden, with SCOR reporting a 9% rate increase, which it says should lead to a significant improvement in profitability.

Across the Group, SCOR has recorded a net loss of EUR 301 million in 2022 compared with income of EUR 456 million in 2021.

However, GWP increased from EUR 17.6 billion in 2021 to EUR 19.7 billion in 2022, with growth evident in both P&C and L&H during the year.

Denis Kessler, Chairman of SCOR, said, “The Group’s annual results are very disappointing despite a solid performance in the fourth quarter. A sustainable return to profitability is imperative. A new, highly experienced Chief Executive Officer, Mr Thierry Léger, will join the Group on May 1, 2023. He will present the broad outlines of his strategic plan at the Annual General Meeting on May 25, 2023, and will implement it without delay and with great determination after presenting it to the investors in September 2023. This will enable the Group to take full advantage of its global underwriting platform and technical expertise to seize the opportunities available in the L&H and P&C reinsurance markets, building on its status as a Tier 1 reinsurer.

“The Board of Directors is confident in the Group’s ability to return to growth, restore profitability, and reinforce its solvency. Consequently, it proposes a dividend of EUR 1.40 per share for 2022, which will be submitted for shareholders’ approval at the Annual General Meeting.”

François de Varenne, interim Chief Executive Officer of SCOR, added, “2022 has been a difficult year for SCOR, even if the fourth quarter was better than the previous quarters. With the normalization of the pandemic, the L&H reinsurance business performed very well in 2022. The release of L&H excess reserve margins enabled the Group to finance the increase in P&C technical reserves. Along with P&C reinsurance, L&H is generating significant diversification benefits, and IFRS 17 will reveal the full value of its portfolio.

“The P&C renewals at January 1, 2023, confirm the continued hardening of the market. Reinvestment rates are expected to remain high, increasing the financial contribution of the investment portfolio. The teams are fully mobilized to accelerate the execution of the one-year plan to restore the Group’s profitability and to ensure the transition to the new IFRS 17 standard. We are ready to support the new CEO in the preparation and execution of a new, ambitious strategic plan.”