Fitch Ups SCOR Ratings to ‘A-‘; Affirms Revios ‘A-‘; Company Comments

Fitch Ratings has upgraded France’s SCOR Group insurer financial strength (IFS) and issuer default (IDR) ratings to “A-” from “BBB+” and SCOR S.A’s senior unsecured rating to “A-” from “BBB+”.

Fitch also removed the ratings from its “Rating Watch Positive” list, and affirmed its “F2” Short-term rating on SCOR S.A. At the same time, Fitch assigned its “A-” IFS rating to SCOR Vie and SCOR Global P&C, and affirmed its “A-” rating on Revios Ruckversicherung, which SCOR is acquiring. The rating has also been removed from Fitch’s “Rating Watch Negative.” A Stable Outlook has been assigned to all of the companies.

“The rating actions reflect further improvements in the group’s capital adequacy and business position, the positive effects of its ongoing strategic refocusing, including the acquisition of Revios, as well as its improving profitability,” said Fitch.

This latest upgrade puts SCOR back in the “A” rated category that it lost following a disastrous 2002 (See IJ Website April 1, 2003). A.M. Best has also raised the Group’s ratings to “A-” (See IJ Website Sept. 11). In a bulletin SCOR said it “is pleased with Fitch’s decision to upgrade the rating of the Group and its subsidiaries from “BBB+” to “A-, stable outlook”.

It also noted that “Fitch’s decision to upgrade the Group’s rating was motivated by improvements in the Group’s capital adequacy and business position, the positive effects of its ongoing strategic refocusing, including the acquisition of Revios, as well as its improving profitability. All of the major rating agencies now class the SCOR group in the “A” category, which was one of the main objectives of the “Moving Forward” plan.”

Fitch duly noted that “SCOR’s capital position has been further strengthened by the group’s ability to post recurring positive net income, the assumption of profitable life reinsurance policies as well as the conservative funding policy applied to finance acquisitions, the most important of which being Revios which is expected to be closed in the very near future,” the bulletin continued. Fitch also said it “expects that SCOR’s capital adequacy will stabilize in the near future at around its current adequate level. Future retained earnings are likely to compensate for increased capital requirements relating to internal growth. Fitch also expects SCOR’s debt leverage to reduce in the near future.”

The rating agency also expressed its opinion that “SCOR’s business position will further improve during the important 2007 renewal season. This expectation is based on a more favorable market perception of the group’s financial strength, the demonstrated resilience of SCOR’s client base and the group’s ability to increase its market shares in selected countries and business lines in some of which notable investments have been made.

“SCOR’s management team has established and implemented a consistent strategy over the past four years, reflected in the refocusing of the group’s franchise in countries and business lines in which it enjoys not only critical size but also competitive advantages. Due to both internal and external growth, the group’s activities are now more evenly balanced between life and non-life reinsurance bringing material diversification, which has a favorable impact on the group’s risk profile.

“Although trending positively, SCOR’s profitability can still be improved upon. Competitive underwriting conditions, the need to respond to possible minor adverse reserve development as well as the run-off cost of some discontinued operations create challenging conditions for SCOR to achieve significant earnings improvement in the short term. In addition, the restructuring plan aimed at significantly reducing the group’s expenses and headcount continues to involve some execution risks. The integration of Revios is also expected to require management time and commitment. The recovery of the group’s profitability will continue to be carefully monitored by Fitch as a key rating factor.