SCOR continues to make progress towards its full year targets, but its third-quarter was hit by a larger than expected catastrophe loss load, as the reinsurance firm dealt with impacts from hurricane Florence, typhoon Jebi, typhoon Mangkhut and other events.
Analysts estimated SCOR’s Q3 2018 catastrophe losses at somewhere around the EUR 210 million mark, based on its revelation of a 16.5% catastrophe loss ratio for the quarter, versus earned premiums.
The reinsurer said that typhoon Jebi resulted in a pre-tax loss of EUR 105 million, hurricane Florence EUR 50 million and typhoon Mangkhut EUR 22 million, which alongside other attritional catastrophe and weather losses resulted in the 16.5% hit to the quarter.
While above analyst expectations, it’s important to note that the majority of reinsurance firms are expected to suffer above expectation losses for Q3.
SCOR’s third-quarter 2018 operations delivered EUR 80 million of net income for the firm, which while considerably up on the hurricane hit prior year’s EUR -267 million, is still below where equity analysts had estimated it would be, a consensus estimate of around EUR 105 million.
The catastrophe activity is said to be the difference, but this time around the losses are largely manageable by SCOR without calling on too much of its retrocessional reinsurance protection, where as 2017 saw a significant retro benefit to the results.
SCOR also offset the catastrophe losses with a EUR 60 million reserve release from certain longer-tailed lines, which helped to boost the profitability of Q3.
The property and casualty reinsurance combined ratio for the quarter was 98%, would have been 99.5% without the reserve release.
The expense ratio for the P&C segment was up at 7.3%, compared to 6.7% in the prior year, but SCOR said this is partly down to buying more retrocession, which is likely a response to the major hurricanes and catastrophes of 2017.
We understand SCOR is out in the market with its retro renewal for 2019 right now, as it continues its habit of being one of the first in the market in the hopes of securing advantageous terms.
SCOR delivered net income of EUR 342 million for the first nine months of 2018, a significant increase from the EUR 25 million in the prior year. Return on equity (ROE) for the first nine months came out at 7.6%.
Normalised, so without the impact of U.S. tax laws, net income would have reached EUR 405 million and ROE was 8.9%, which the company noted are both higher than SCOR’s targets set out in its “Vision in Action” plan.
Denis Kessler, Chairman & Chief Executive Officer of SCOR, commented on the results, “SCOR records a very solid performance in the first nine months of 2018. Excluding the impact of the U.S. tax reform, the Group has exceeded the targets set out in the plan “Vision in Action”, despite the numerous natural catastrophes that took place across various regions in the third quarter. This performance bears witness to the relevance of our strategy, which is based on a controlled risk appetite, a disciplined underwriting policy and an effective capital shield. The Group is in very good shape and well on track to meet the targets of “Vision in Action”.”