France headquartered global reinsurer SCOR is expecting market conditions to remain favourable at the mid-year reinsurance renewals in June and July, as it continues to reposition its portfolio under the backdrop of improving pricing and terms.
SCOR has been repositioning itself, including an adjustment away from some catastrophe exposures, which in the first-quarter of 2023 has contributed to a 3.1% decline in gross premiums written at SCOR’s P&C business units.
The reinsurer reported lower insurance revenue of EUR 3,926 million for Q1 2023, down 4.2% on the prior year.
But, the first-quarter of 2023 was much more profitable for the company, with group net income of EUR 311 million far better than the prior year period net loss of EUR -35 million.
“The positive phase of the P&C reinsurance cycle, marked by a strong improvement in pricing conditions, is ongoing,” SCOR reported this morning.
Saying that it averaged 7% positive price increases at the April 1 reinsurance renewal, SCOR now expects positive momentum in market conditions again at the June and July renewals.
The reinsurer renewed 12% more in P&C reinsurance premiums at the April renewals, while global lines grew by 28%, with capital redeployed from catastrophe exposed proportional layers to property catastrophe excess-of-loss business that sits above the working layers of reinsurance towers.
This moving up and towards excess-of-loss reinsurance is expected to shelter SCOR more from the frequency type catastrophe and weather loss effects, while keeping the nat cat load relatively stable.
Overall, the quality of reinsurers’ portfolios is expected to rise in the current hard market, with improvements in terms and conditions, and SCOR explained the improved portfolio quality written, “should lead to a significant improvement in technical profitability.”
All of this despite still high levels of natural catastrophe losses, with the company reporting a Nat Cat ratio of 9.9%, in line with the 10% budget it had set itself.
On catastrophe activity, SCOR cited the major earthquake in Turkey, tornadoes in the U.S. and floods in New Zealand in the first-quarter, as events that impacted the group.
The Turkey earthquake was the largest natural catastrophe loss of the quarter for SCOR, contributing 6.4 points of the nat cat ratio.
SCOR reported a combined ratio of 85.2% for the first-quarter of 2023, below its assumption of around 87% for the full-year.
Retrocession benefits were not significant in the quarter, SCOR explained, with limited recoveries made, as expected in a strong underwriting quarter, while there were some proportional retrocession impacts.
As a result, SCOR reported a negative retrocession effect of EUR -148 million for the quarter.
Denis Kessler, Chairman of SCOR, commented on the first-quarter, “SCOR has generated excellent results in Q1 2023. The Group is taking full advantage of the current favorable environment. Our new CEO, Thierry Léger, is in charge of drawing up a new three-year strategic plan under IFRS 17. This plan will define the best ways and means for the Group to consolidate its position as a leading global reinsurer, taking advantage of its Tier 1 global underwriting platform and technical know-how. The Board of Directors is confident in the Group’s ability to actively pursue its growth, with the twofold objective of solvency and value creation.”
Thierry Léger, Chief Executive Officer of SCOR, added, “The Q1 results are very satisfactory. All business units – P&C, L&H and Investments – have generated positive results, and the Group’s Economic Value has increased significantly. In parallel, our Finance teams have successfully managed the transition to the new IFRS 17 framework: we would like to thank them for this achievement. I am now looking to the future: the current market is very supportive, and all the teams are mobilized to take advantage of this favorable environment. I look forward to presenting the outline of the new strategic plan at the Annual General Meeting.”
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