SCOR ‘A-‘ rating affirmed, S & P’s

In response to reinsurer SCOR S.A.’s plan to acquire reinsurer Revios Rckversicherung AG and its subsidiaries, Standard & Poor’s Ratings Services has affirmed SCOR’s ‘A-‘ long-term counterparty credit and insurer financial strength ratings.
The deal between Paris-based SCOR and German life reinsurer Revios is valued at US$774 million (605 million).
S&P’s says its outlook on all entities is stable.
“The affirmation reflects our expectation that SCOR will be able to successfully negotiate the short-term integration challenges that its acquisition of Revios will pose while continuing to successfully execute on the key tenets of its ‘Moving Forward’ plan,” S & P’s credit analyst Peter Grant says.
The purchase price, which S & P’s says represents 1.02x Revios’ reported embedded value at Dec. 31, 2004, will be funded through a combination of equity and qualifying hybrid. The acquisition will add greater diversity to SCOR’s business profile and, S & P’s adds, will “strengthen its competitive position in a number of key European markets–particularly Germany, Scandinavia, and the U.K.” This acquisition will also allow SCOR to protect its already strong competitive position in France, Spain, and Italy, according to the rating agency’s report.
S&P’s awarded SCOR the stable outlook under the expectations that SCOR will:
* Fully fund the acquisition through a combination of equity and qualifying hybrid within six months of the completion date;
* Successfully negotiate the short-term integration challenges its acquisition of Revios will pose, particularly in respect of the consolidation of the enterprise risk management and financial reporting processes of the merged entity; and
* Continue to execute on the key tenets of its “Moving Forward” plan–particularly with regard to SCOR’s commitment to improve the performance of its non-life division through a combination of prudent underwriting, proactive cycle management, and cost control.
S & P’s says that SCOR’s failure to meet these objectives will likely place downward pressure on its ratings.
While the upside potential for the ratings is limited over the rating horizon, S & P’s says an elevated rating could emerge over the longer term if the group is able to “build a track record of sustained improvement in the operating performance of its non-life division and leverage its increased scale to further reinforce its competitive position in the life reinsurance division, particularly in the competitive North American market.”