SCOR has published its financials for the first three quarters of 2022, with the accent on challenging reinsurance pricing, Cat claims, plus a return to more normal mortality rates following Covid19. Although it’s worth noting that in the UK, according to the ONS, all age groups mortality is up by 15% against the 5 year average.
Here’s the word;
In the third quarter of 2022, the reinsurance industry continues to face a challenging environment. The large and numerous natural catastrophes such as Hurricane Ian in Florida, Typhoon Nanmadol in Japan and Hurricane Fiona in Canada are further fuelling an already hardening reinsurance market where capacity is scarce. The macro-economic environment is also volatile, with central banks hiking interest rates to fight against inflation.
SCOR’s challenging P&L performance reflects the highly volatile environment:
- SCOR P&C’s results reflect heavy Nat Cat claims (EUR 517 million in Q3 2022 contributing to a total of EUR 907 million for the first nine months of the year). Most notably, in Q3 2022, SCOR incurred EUR 279 million claims on Hurricane Ian. The cost of convective storms and hailstorms in France in June increases to EUR 166 million (EUR 113 million on top of the cost booked in Q2 2022). Man-made claims activity has been increasing as well in Q3 2022.
- SCOR L&H’s results benefit from positive underlying trends (including decreasing Covid-19 deaths in Q3 2022).
- Investment return benefits from the increase in interest rates with a 1.9% Return on Invested Assets for the first nine months of 2022 (2.3% Return on Invested Assets in Q3 2022) and will continue to see an uplift as interest rates continue to increase: reinvestment yield stands at 5.1% as of 30th September 2022, versus 2.1% as of 31st December 2021.
SCOR has also taken meaningful actions on its balance sheet:
- SCOR strengthens its P&C reserves by EUR 485 million (representing 2.3% of the EUR 21.5bn net P&C reserves) to take a prudent stance in a claims environment marked by high economic and social inflation.
- The release of IFRS 4 excess L&H reserves margin results in a technical profit EUR 460 million higher than the 8.3% normalized technical margin level in Q3 2022.
- SCOR takes a prudent stance on the tax assumptions on its balance sheet, through provision and non-recognition of Deferred Tax Assets (“DTAs”) leading to an additional EUR 94 million charge in Q3 2022, resulting in a EUR 139 million charge YTD. The losses not recognized for DTA purposes can be fully activated at a future date if appropriate. Going forward, SCOR expects to be able to absorb the DTA utilization and reduction in recoverability period.
SCOR’s solvency position remains very strong, at 217%, in the upper part of its optimal solvency range. This strong capital base will enable SCOR to take advantage of the acceleration of the hardening of the P&C market.
The combined effect of these developments results in a net loss of EUR -509 million for the first nine months of 2022 (EUR -270 million in Q3). The Group is currently focused on short-term remediation actions. Longer term commitments and targets will be unveiled to the market in 2023, under the new IFRS 17 accounting framework taking into account both the new macroeconomic context and the 2022 financial year results.
Read the full results on the SCOR site here.