AM Best removes SCOR’s ratings from under review

AM Best has removed SCOR’s ratings from under review with developing implications following the completion of its impact assessment of the French reinsurer’s life reserving review.

The rating agency has additionally affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings of “a+” (Excellent) of SCOR and its main operating subsidiaries, with a stable outlook.

As per AM Best, the ratings reflect SCOR’s balance sheet strength, which it assesses as strong, as well as the French reinsurer’s adequate operating performance, very favourable business profile and appropriate enterprise risk management.

On its rationale for removing SCOR’s ratings from under review, AM Best said it has completed its assessment of the impact of the French reinsurer’s life reserving review and new strategic plan for life and health (L&H) business on its rating fundamentals.

The ratings were initially placed under review with developing implications on July 24, 2024, following SCOR’s publication of an update on its second-quarter 2024 and full-year 2024 results. SCOR also announced a reserving and assumptions review for the L&H activities, which was completed in the third quarter of 2024.

“Reserving assumption changes impacted the organisation’s pre-tax L&H contractual service margin (CSM), with a negative adjustment (at current yield curves) of €0.8 billion as per third quarter 2024,” AM Best explained.

On December 12, 2024, SCOR announced its revised strategic plan for its L&H activities, which included a significant shift in the L&H business mix, with the French reinsurer planning to reduce its exposure to protection products and increase its exposure towards longevity lines, as well as financial solutions.

Now, AM Best has said that it expects SCOR’s risk-adjusted capitalisation for year-end 2024 to decline as a result of the reduction in earnings and CSM, but to remain supportive of the strong balance sheet strength assessment.

“Risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR) was at a very strong level at year-end 2023. The group benefits from a conservative investment portfolio and a robust retrocession programme designed to shield its capital base, which includes a new whole account stop loss protection for the 2025-2027 period,” the rating agency added.

AM Best continued, “A partially offsetting factor is SCOR’s reliance on soft capital components, which includes hybrid debt, value of in-force life business and a contingent capital facility.

“SCOR continues to maintain its prominent position as one of the top global reinsurers, with excellent product and geographic diversification.

“The group’s internationally recognised franchise, long-standing client relationships and technical expertise help SCOR manage local and global reinsurance market cycles.”

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