November 24, 2003 by Canadian Underwriter
French reinsurer SCOR Group is “formally contesting” the downgrade it suffered at the hands of rating agency Fitch. SCOR says the downgrade to BB+ from BBB- is “unfounded, ill-timed and causes serious damage to the company”.
In a statement, the reinsurer says the downgrade, which comes just two weeks before the company is set to complete a EUR600 million capital-raising venture, has not been justified to it by Fitch.
Fitch released the rating announcement on November 19, stating “the rating action reflects Fitch’s acknowledgement of further reserve deficiencies mostly relating to SCOR’s US and Bermudian subsidiaries and its concerns about possible further unfavorable developments”.
SCOR counters that an independent analysis of its reserves for these exposures has been conducted, specifically prior years’ claims on its US book, and that the bulk of these lines have already been exited. “In fixing today its judgment of the necessary reserves above the estimates of the independent actuaries, Fitch would want to impose on SCOR a level of reserving which does not correspond to market practice; this measure is therefore discriminatory and unacceptable.”
Fitch says the EUR 589 million reserve shortfall acknowledged by the company has led to a drop in shareholder equity, making it difficult for the company to take advantage of the current favorable market. It adds that even if the capital-raising move is successful, the rating will be affirmed at BB+, not upgraded. And should it be unsuccessful, the reinsurer can expect to see a further downgrade.