French reinsurer SCOR enjoyed a 6.3 percent bounce in its shares on Friday after the ratings agency AM Best affirmed its BB+ financial strength rating with positive outlook while also upgrading some of the reinsurer’s senior and subordinated debt instruments.
Shares in the Paris bourse quoted reinsurer climbed to €1.52 in response to AM Best’s positive comments. “The ratings of SCOR reflect its very good current risk-adjusted capitalisation, which is likely to remain stable as a consequence of its improved earnings and ongoing efforts to reduce non-life premiums and run-off claim reserves. The overall quality of capital is also improving due to the reduced proportion of "soft" capital (i.e. life deferred acquisition costs and value of business acquired)”.
However, the rating agency added that the reinsurer’s legacy exposures remain a significant concern: “AM Best believes that SCOR's capitalisation remains negatively affected by potential further adverse development in its reserves (in particular, French motor, US general liability and programme and workers' compensation business). This volatility will likely be reduced somewhat by the recently agreed commutations” it explained.
AM Best continued: “SCOR's consolidated net income continues to improve, and AM Best anticipates that it will most likely reach approximately €85mn ($108mn) at year-end 2004. Over the next two years, A.M. Best also anticipates that non-life underwriting profitability will benefit from reduced expenses (expense ratio likely to decrease to approximately 30 percent) and a stable loss ratio (approximately 70 percent). Current excellent life technical profitability will remain stable as the company reduces its underwriting of non-proportional covers”.