SCOR’s P&C underwriting profits despite higher loss ratio in 2019

France headquartered global reinsurance firm SCOR delivered a profit from its property and casualty underwriting business in 2019 despite higher than budgeted catastrophe losses and an overall loss ratio that came out higher than the prior year.

SCOR has reported its results this morning, revealing positive net income of EUR 420 million generated across its business, driven by premium growth and profitable underwriting.

Across SCOR’s reinsurance business, premiums written rose 7.1% for the year as the company capitalised on market opportunities to grow its book.

Net income of EUR 422 million was around one-third higher than the EUR 322 million earned in 2018, while return on equity (RoE) in 2019 was 7%, up from 5.5% for 2018.

SCOR Global P&C’s gross written premiums rose by an impressive 12.7% for the year, with roughly EUR 1 billion of premiums added during 2019.

At the same time the business absorbed a high level of losses, from what its CEO Dennis Kessler called “the third consecutive year marked by a high level of natural catastrophes and man-made claims” ending the year with a technical underwriting profit and a combined ratio of 99%.

In the fourth quarter of 2019 the impact was particularly acute, as SCOR fell to an underwriting loss for the period with a combined ratio of 108.8% in the SCOR P&C reinsurance unit, although that is an improvement of 7.7 points on the prior year period.

Retrocession has once again helped SCOR during the year, with positive flow of EUR 12 million of retrocessional reinsurance proceeds reported in the fourth quarter for the second year running, likely due to the impacts of Japanese typhoon Hagibis and other catastrophe events during the period.

Denis Kessler, Chairman & Chief Executive Officer of SCOR, commented on the results, “In 2019, the third consecutive year marked by a high level of natural catastrophes and man-made claims, as well as the persistence of a low interest rate environment, SCOR demonstrates once again its capacity to absorb shocks.

“The Group continues its development and its strong value creation, recording sustainable growth, an increase in profitability, and further strengthening of solvency. Our shareholder return is attractive with a proposed dividend of EUR 1.80 for 2019 subject to the approval of the Annual General Assembly. SCOR as an independent global Tier one reinsurance company is fully mobilized to reach the targets of its “Quantum Leap” strategic plan.”

In the P&C underwriting business specifically, SCOR cited “robust successive renewals in H2 2018 and 2019 on U.S Treaty reinsurance as well as on Specialty insurance.”

The catastrophe loss ratio reached 11.6% in 2019, higher than the budgeted 7%.

Catastrophe loss activity was driven by driven by typhoons Hagibi (EUR 227 million net of retrocession and pre-tax) and typhoon Faxai (EUR 156 million net of retrocession and pre-tax) in Japan, Hurricane Dorian (EUR 90 million net of retrocession and pre-tax) in the Bahamas, as well as loss creep from 2018’s Japanese typhoons Jebi and Trami (EUR 66 million net of retrocession and pre-tax) which hit SCOR in the first-half of last year.

Attritional losses were a little higher than 2018, resulting in an attritional loss and commission ratio for the SCOR P&C business of 80.5%. This was down to “a modestly higher level of man-made claims and the impact of the decision taken on the Ogden rate in the United Kingdom” SCOR explained.

SCOR’s normalised combined ratio metric for 2019 missed its target for the P&C business, coming out at 96.1%, when the targeted range is 95% to 96%.

Finally on SCOR’s P&C business, a slightly higher level of reserve releases, EUR 110 million in 2019 compared to EUR 100 million in 2018, has also helped to better the result a little for that segment.

SCOR has suffered from catastrophe losses in the same way all other reinsurers have in 2019, but its growth over recent years and expansion into specialty P&C lines is likely also helping to insulate it to a degree from the major catastrophe events.

In addition, SCOR’s retrocession program continues to play an important role for the reinsurance company, responding during the quarters when the largest losses occur.

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