Canadian Underwriter

Nat-cats contribute to decrease in net income at SCOR for first three quarters of 2016 compared to prior-year period

October 27, 2016   by Canadian Underwriter

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The Group net income for SCOR for the first nine months of 2016 took a hit, partly as a result of the impact of natural catastrophes, falling 11.0% to 438 million euros compared to 492 million euros for the first three quarters of 2015.

Global business results concept on blackboardThe decrease was “due to a higher number of natural catastrophes and a challenging macroeconomic environment,” notes a SCOR statement Thursday. Specifically for 2016 Q3, net income was 163 million euros compared to 165 million euros in 2015 Q3.

A 5.7% net nat-cat ratio in the first nine months of 2016 came from a series of mid-size events, SCOR reports in the statement. These were mainly the Fort McMurray wildfires, earthquakes in Japan (Kumatomo), Taiwan and Ecuador, hailstorms in Netherlands and Texas, and floods in Europe and Louisiana.

For operating results, SCOR posted 710 million euros in the first three quarters of 2016 compared to 802 million euros for the first nine months of 2015.

For Q3, operating results were 244 million euros in 2016 compared to 262 million euros in 2015.

Related: SCOR reports combined ratio of 93.8% for first half of 2016, up from 90.9% for the first six months of 2015

Despite the decrease in net income, “high-quality results in terms of earnings, profitability and cash flow generation” for the first three quarters of 2016 confirms the strength of the company’s business, the statement notes.

During 2016 Q3, both targets of SCOR’s new strategic plan “Vision in Action” – profitability and solvency – have been achieved. The plan relies on three dynamics to enhance company profitability and solvency: build on the continuity and the consistency of previous plans, expand and deepen the franchise, and normalize the asset management policy.

With regard to premiums, gross written premiums (GWP) were 10,216 million euros for the first nine months of 2016, a 2.2% increase over the 9,996 million euros for the same period in 2015.

For 2016 Q3, though, GWP was down slightly to 3,481 million euros compared to 3,503 million euros in 2015 Q3.

The increase for the first three quarters of 2016 was the result of stable Global P&C GWP, which was 4,234 million compared to 4,356 million euros for the prior-year period. For the third quarter specifically, GWP was up 2.1% to 2,048 million euros in 2016 Q3 compared to 2,007 million euros in 2015 Q3.

SCOR points to strong new business inflow in Protection and Financial Solutions in Asia-Pacific; continued positive new business trends across all product lines in EMEA and the Americas; and overall positive development on the in-force book.

Global Life, for its part, made a strong contribution, with GWP reaching 5,982 million euros for the first nine months of 2016, up 6.1% from 5,641 million euros for the same period in 2015.

In terms of net combined ratio, Global P&C recorded strong technical profitability in the first nine months of 2016 at 93.0%, although it increased from 90.8% for the first three quarters of 2015. Combined ratio was also up for 2016 Q3 specifically, reaching 91.4% compared to 90.6% for the same quarter in 2015.

For Global Life, SCOR reports that it recorded a robust technical margin of 7.1% in the first nine months of 2016 compared to 7.2% for the same three quarters in 2015. The percentages were the same for 2016 Q3 and 2015 Q3.

The business model delivered “a robust operating cash flow” of 1.3 billion as of Sept. 30, 2016 compared to 558 million euros for the same period in 2015, SCOR states.

“This results from the generation of strong recurring cash flows in 2016 and two exceptional items: SCOR Global P&C received a non-recurring fund withheld payment of around 300 million euros, and SCOR Global Life benefited from a timing difference in claims payments, which is expected to normalize by the end of 2016,” it adds.

“SCOR Global P&C is working on a promising pipeline of new business between now and the end of the year,” the company reports. That being the case – and in accordance with the new strategic plan – SCOR Global P&C confirms the assumption of annual GWP growth of between 3% and 8% from 2016 to 2019.

“Considering the extremely low interest rate environment, SCOR has delivered strong results since the beginning of 2016, in terms of profitability, solvency and cash flow generation,” says Denis Kessler, chairman and CEO of SCOR.

“SCOR is well-positioned to meet the needs of its clients throughout the world, and actively implementing its new strategic plan and is preparing the year-end renewals,” Kessler adds.

Other SCOR results as of Sept. 30 include the following:

  • shareholders’ equity stands at 6,436 million euros compared to 6,363 million euros at the end of 2015;
  • financial leverage stands at 25.1%;
  • estimated solvency ratio stands at 212%, within the optimal solvency range of 185% to 220% as defined in the company’s strategic plan; and
  • Global Investments delivered a strong and recurring financial contribution of 409 million euros for the first nine months of the year.