Canadian Underwriter

Scor & RSA see ratings downgraded in the wake of poor Q-4 results

January 16, 2002   by Canadian Underwriter

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Two global giants have seen their ratings downgraded as a result of poor financial results in the fourth quarter of 2001. A.M. Best has downgraded Scor Re from A+ (Superior) to A (Excellent), a grading that also applies to Scor Canada Reinsurance Co and reflecting the company’s financial strength, existing debt and commercial paper ratings. Standard & Poor’s took similar action against Scor’s rating.
Earlier this week, Scor announced that it estimated Q-4 2001 losses of EUR 250 million (Cdn$353 million) as a result of higher than expected claims issues for the period. These did not, however, include World Trade Center loss estimates, which remain the same as those announced just after the September 11 events at Cdn$240-320 million. Poor investment results and the weakening Euro were also factors, the company reports.
A.M. Best notes that Scor was hard hit by September 11, as well as “severe losses” in its commercial book of business.
U.K.-based Royal & SunAlliance also saw its financial strength rating downgraded from A+ to A by A.M. Best. Outlook for the company continues to be negative, the rating agency reports, and the company’s subordinated debt and preferred stock ratings were also downgraded (from a to bbb+, and from a- to bbb, respectively).
The ratings downgrade applies to RSA’s Canadian subsidiaries, including Royal & SunAlliance Canada, Quebec Assurance, Western Assurance and Unifund Assurance.
Factors in the rating include ongoing potential for reserve deterioration in RSA’s U.S. operations and increased exposure to short-term borrowings, as well as the company’s reduced risk-adjusted capital base as a result of its September 11 exposure and lagging equity markets.
A.M. Best does predict both insurers will benefit from the hardening market in 2002, noting that Scor in particular is taking steps to reorganize its underperforming lines of business.

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