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2021-10-27

First Nine Months 2021 results: SCOR records a net income of EUR 339 million, demonstrating its shock-absorbing capacity, and launches a EUR 200 million share buy-back program

Press Release
October 27, 2021 - N° 26

First Nine Months 2021 results

SCOR records a net income of EUR 339 million,
demonstrating its shock-absorbing capacity,
and launches a EUR 200 million share buy-back program

  • Gross written premiums of EUR 13,047 million in the first nine months of 2021, up 10.1%1 compared with Q3 2020 YTD
  • Net income of EUR 339 million in the first nine months of 2021, up 151.1% compared with the first nine months of 2020
  • Annualized return on equity of 7.3% in the first nine months of 2021, 683 bps above the risk-free rate2
  • Estimated solvency ratio of 225%3 at end of September 2021, above the optimal solvency range of 185% - 220% as defined in the “Quantum Leap” strategic plan
  • EUR 200 million share buy-back starting October 28, 2021, and finalized at the latest by March 2022: accretive deployment of capital that takes the solvency ratio to 225%
  • Well-defined and attractive dividend policy pursued
  • Cost ratio of 4.3% of gross written premiums, more favorable than the “Quantum Leap” assumption of ~5.0%
  • Committed to “Quantum Leap” plan delivery while preparing actively for the upcoming strategic plan

 

SCOR SE’s Board of Directors met on October 26, 2021, under the chairmanship of Denis Kessler, to approve the Group’s Q3 2021 financial statements.

The key highlights are:

Strong earnings capacity in a volatile environment

Overall, SCOR records a net income of EUR 339 million in the first nine months of 2021 and delivers an estimated solvency of 225%4.

In the first nine months of 2021, SCOR’s results were heavily impacted by a series of large
natural catastrophes. The total cost of natural catastrophes stands at EUR 708 million (net of retrocession and before tax), in particular driven by European floods and Hurricane Ida in the third quarter of 2021. Those two events had a total impact of EUR 343 million (net of retrocession and before tax). In the first nine months of 2021, Covid-19 claims continued to be manageable, standing on the Life side at EUR 299 million5 6 (net of retrocession and before tax), of which EUR 241 million (net of retrocession and before tax) comes from the U.S. mortality portfolio, and increasing by EUR 75 million (net of retrocession and before tax) in the third quarter of 2021. On the P&C side, Covid-19 claims have been stable since June 30, 2021 standing at a total of EUR 109 million in the first nine months of 2021 (net of retrocession and before tax). In addition, SCOR benefited from a positive one-off revaluation impact of EUR 64 million related to the IPO of Doma Holdings7, demonstrating the Group’s successful investment strategy in new ventures focusing on Insurtech-driven underwriting companies.

  • Gross written premiums of EUR 13,047 million in the first nine months of 2021 are up 10.1% at constant exchange rates compared with the first nine months of 2020 (up 6.2% at current exchange rates).
  • SCOR Global P&C gross written premiums are up 16.7% at constant exchange rates compared with the first nine months of 2020 (up 12.1% at current exchange rates), benefiting from a strong market environment both in reinsurance and insurance markets. The net combined ratio for the first nine months stands at 102.7%, including 14.8% of natural catastrophes and 2.3% of Covid-19 related claims.
  • SCOR Global Life gross written premiums are up 5.0% at constant exchange rates compared with the first nine months of 2020 (up 1.7% at current exchange rates). Over the period, SCOR Global Life delivers a technical margin of 11.3%, driven by the recent Life in-force transaction.
  • SCOR Global Investments delivers a return on invested assets of 2.3%8 in the first nine months of 2021.
  • The Group cost ratio, which stands at 4.3% of gross written premiums in the first nine months of 2021, is more favorable than the “Quantum Leap” assumption of ~5.0%.
  • The Group net income stands at EUR 339 million in the first nine months of 2021. The annualized return on equity (ROE) stands at 7.3%, 683 bps above the risk-free rate9.
  • The Group generates high operating cash flows of EUR 2,018 million in the first nine months of 2021 of which EUR 860 million relate to the recent Life in-force transaction. The Group’s total liquidity is very strong, standing at EUR 3.3 billion as of September 30, 2021.
  • The Group shareholders’ equity stands at EUR 6,315 million10 as of September 30, 2021. This results in a book value per share of EUR 34.13, compared to EUR 33.01 as of December 31, 2020.
  • The Group financial leverage stands at 28.0% as of September 30, 2021, down 0.5% points compared to December 31, 2020.
  • The Group solvency ratio is estimated at 225%11 on September 30, 2021, above the optimal solvency range of 185% - 220% as defined in the “Quantum Leap” strategic plan.

A EUR 200 million share buy-back program starting October 28, 2021, and finalized at the latest by March 2022

A share buyback is an accretive way to deploy capital and deliver further value to SCOR’s shareholders.

The recent Life retrocession in-force transaction, which closed on the last day of the second quarter, unlocked significant value, generating USD 1 billion in cashflows while increasing the Group’s degrees of freedom for value-accretive capital management. As at the end of Q2 2021, SCOR’s estimated solvency position was extremely strong, as demonstrated by a solvency ratio of 245%, significantly above the upper end of its optimal solvency range of 185%-220%.

SCOR has assessed the various options to optimally deploy capital, to create long-term value for SCOR’s shareholders and revert to the upper end of the 185-220% optimal solvency range. As presented at the September 8th Investor Day, SCOR will continue to proactively deploy capital, to:

  • Seize profitable growth opportunities in the continuously hardening P&C market, and re-balance its exposure towards P&C business, while shifting its portfolio mix away from Natural Catastrophes business volatility, and leveraging retrocession to protect earnings;
    • Actively pursue diversification of its investment portfolio into value-creation assets to target 10% exposure by the end of 2022, as well as by deploying its excess liquidity into corporate bond (the reinvestment of excess liquidity program is on track, and will be finalized by Q4 2021), and maintaining a largely matched duration as it has over the last few years.

Considering these capital allocation decisions for 2022 to pursue its profitable growth, the Group’s solvency ratio is estimated to be at 225%12 on September 30, 2021. The proposed revision of the Solvency II Framework presented by the European Commission on September 22, 2021 would further support the solvency of the Group in the mid-term.

In view of this capital position, noting that the U.S. hurricane season is coming to an end and that the regulatory constraints against capital distribution (dividends and share buy-backs) were lifted on October 1, 2021 by the ACPR (Autorité de Contrôle Prudentiel et de Résolution)13, SCOR launches a share buy-back program of EUR 200 million that will start on October 28, 2021, and will be fully executed in the market at the latest by the end of March 2022. Execution of the share buy-back will be subject to market conditions. This share buy-back program is expected to impact the Group’s solvency ratio by c. -4 ppts14, to 225%. SCOR intends to allocate the repurchased shares to cancellation.

SCOR’s dividend policy remains unchanged: SCOR continues to favor dividends as a way to remunerate its shareholders and pursues the attractive dividend policy that it has implemented over the past years.

The share buy-back will be conducted within the framework approved by the annual general meeting held on June 30, 2021. To carry out the program, SCOR may grant mandates to independent investment services providers.

SCOR takes proactive actions to improve its operational performance

SCOR is implementing actions to improve its operational performance:

  • At January renewal, the Group will seize profitable growth opportunities in the continuously hardening P&C market and re-balance its exposure towards P&C business.
  • The Group will reduce its exposure to Nat Cat by shifting its portfolio mix and leveraging retrocession to limit earnings volatility.
  • SCOR is focusing on technical profitability on each market, each line of business, each client, each contract, in order to remunerate allocated capital under “Quantum Leap” assumptions.
  • SCOR increases its risk appetite on the asset side through investment in value creation assets. Liquidity will be reduced from 16% at June 30, 2021, to 9% by year-end 2021.
  • SCOR is pursuing capital management actions to optimize its balance sheet.

SCOR is actively preparing the upcoming strategic plan

SCOR delivers on the “Quantum Leap” strategic plan, which runs until the end of 2022, and will present in Spring 2022 the orientations for the new strategic plan to start on January 1, 2023.

The Group has actively embarked on the preparation of its upcoming strategic plan, which builds on:

  • An exploration to deepen the franchise and create value for shareholders;
  • A detailed analysis of the performance of SCOR’s portfolios to optimize the value of its core business;
  • A review of SCOR’s operating model to take full advantage of a nimble and lean organization;
  • An analysis of the options available to enhance its financial and capital management.

The Group is nurturing its strong and disciplined underwriting ethos and will focus on Culture & People, Business Leadership, and Financial Performance to build a differentiated value proposition and deliver on its two targets: profitability and solvency.

Denis Kessler, Chairman of SCOR, comments: “G...

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