Specialty market firming boosts Scor’s profits despite nat cat and Covid losses

Premium growth of 14% in the large commercial risk space on the back of a 15% rate change helped Scor overcome further hefty nat cat losses and more than €100m of Covid-related claims sparked by adverse court decisions in the UK and France during the second quarter, to deliver a much improved first-half net profit for 2021.

Laurent Rousseau, Scor’s recently appointed CEO, suggested that the outlook for the group remains healthy, with continued attractive terms expected in both reinsurance and specialty insurance business.

“The group continues to expand its franchise, in both life and P&C, and delivers a robust underlying performance despite natural catastrophes, the ongoing Covid-19 pandemic and the low-yield environment. Scor is very well positioned to capture profitable growth opportunities, in particular in the P&C (re)insurance market where pricing and terms and conditions are increasingly attractive,” said Mr Rousseau.

The primary specialty insurance business that Scor has been building in recent times appears to be justifying the investment.

“Scor Global P&C continued to leverage its specialty insurance platform to catch attractive growth opportunities, benefiting from rate-on-rate compounding effects despite a more competitive landscape, particularly in energy, property, and space and aviation. Overall, premiums grew 14% year on year in large commercial risks, with a 15% rate change,” stated the group in its half-year results presentation.

Scor Global P&C delivered growth of 14.3% at constant exchange rates, or 7.1% at current exchange rates, with gross written premiums reaching €3.768bn, up from €3.518bn at the halfway point last year.

“The significant increase in gross written premiums follows strong 2021 renewals seasons on reinsurance and specialty insurance,” said the group.

The P&C business recorded a net combined ratio of 97.2% in the first half of this year. This included a nat cat ratio of 9.4%, above the annual budget of 7%, mainly driven by a heavy cat load in the first quarter that recorded a 12.6% cat ratio. The nat cat ratio in the second quarter stands at 6.1%, driven by the June central European storms.

Covid-19-related claims of €109m were booked in the second quarter. This was caused by an increase in direct gross costs incurred by cedants with adverse court decisions in France and the UK, and cedants filing claims for two separate events corresponding to the March and October 2020 lockdowns, said Scor.

The continued healthy underwriting conditions in specialty insurance and reinsurance lines helped overcome these losses and deliver a net profit for the group of €380m in the first half of this year, compared with only €26m in the first half of 2020.

Moody’s analyst Christian Badorff said Scor’s results confirm a “positive trajectory” seen in the first quarter but did point to the uncertainty surrounding Covid-19 claims.

“In life, underwriting and pandemic-related mortality developed roughly in line with Moody’s expectations. In P&C, the normalised combined ratio continues to benefit from strong pricing momentum, although underwriting performance is negatively affected by above-average natural catastrophe activity and by reserve strengthening for prior-year Covid-19 claims,” added Mr Badorff.

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