SCOR capital raising gets mixed reviews from raters

Rating agencies are taking a mixed view of the recent capital raising move by French reinsurer SCOR, despite it exceeding the original EUR 600 million mark.
SCOR has announced a fully underwritten rights issue of EUR 750 million, higher than its original plan to raise EUR 600 million.
Rating agency Standard & Poor’s has raised the reinsurer’s long-term counterparty credit and insurer financial strength ratings to “BBB+” from “BBB-“, and its short-term counterparty credit and commercial paper ratings to “A2” from “A3”. These ratings have also been removed from creditwatch negative and are stable.
“The stable outlook reflects S&P’s expectation that SCOR’s business position will remain robust within its core markets, although the aggregate level of group premium income underwritten in 2004 will materially decline as SCOR withdraws from non-core markets,” states an S&P release.
A.M. Best affirmed SCOR’s rating, but removed it from negative review to developing review status. This was based not only on the capital raising, but on SCOR signing a contract to reduce 40% of the portfolio of troubled Commercial Risk Partners. A.M. Best is also reviewing its earlier statement that the original EUR 600 million capital boost would be insufficient to warrant an upgrade.
Rating agency Fitch said it would not change its ratings downgrade released last month, and will keep those ratings on a negative watch, regardless of the success of the EUR 750 million capital enhancement plan. “Despite potentially positive developments related to the capital raising and market perceptions as far as security is concerned, Fitch still believes that SCOR’s franchise has been and will remain affected as a consequence of the recent announcements of discontinued business related losses and reserve strengthening.”
The EUR 750 million offering closes on January 7, 2004.