PARIS -- 11/14/08 --
Press Release
14 November 2008
For further information, please contact:
Beat Werder +33 (0)1 46 98 71 39
Chief Communications Officer
Marco Circelli +44 (0) 207 553 8106
Head of Investor Relations
SCOR generates net income of EUR 280 million in the first nine months of
2008 with a liquidity position strongly increasing to EUR 3.2 billion
SCOR generates satisfactory results for the first nine months of 2008,
despite a challenging financial market environment. The results benefit
from a positive operating performance in Life and Non-Life business, as
well as from a prudent asset management policy. SCOR's business model,
which is based on high business and geographical diversification and
focuses on traditional reinsurance, demonstrates its strength in a time of
financial crisis, having also withstood major recent claims following
hurricanes in the United States.
- Net income year-to-date stands at EUR 280 million. Annualized return on
equity (ROE) stands at 10.7% and nine months' earnings per share (EPS) at
EUR 1.56. SCOR achieves a net profit of EUR 38 million in the third quarter
2008.
- Business engines are performing well: Non-Life reports a year-to-date
93.3% technical ratio and a combined ratio of 99.2%, despite major US cat
events Ike and Gustav. Life delivered a year-to-date operating margin of
6.5%.
- Top-line performance is in line with expectations, with year-to-date 2008
gross written premiums standing at EUR 4,325 million, up 27.9% compared to
the first nine months of 2007 on a published and adjusted1 basis. On a pro-
forma basis and at constant exchange rates, premium volume rose by 3.5%.
- Continued focus on liquidity management more than doubles cash and short-
term investments to EUR 3.2 billion compared to 30 September 2007. Positive
operating cash flow in the amount of EUR 711 million year-to-date, plus a
highly liquid bond portfolio with a duration of less than three years,
which is expected to generate additional EUR 2.5 billion of cash by the end
of 2009.
- Very limited reinsurance liabilities exposed to economic activity risks;
no material off balance sheet exposure.
- Investment portfolio affected by asset impairments and writedowns in the
amount of EUR 127 million, partially offset by net realised gains of EUR 62
million. Market turmoil may continue to affect the performance of SCOR's
investment portfolio in future quarters.
- Overall, very robust shareholders' equity of EUR 3.5 billion at 30
September 2008. Book value per share stands at EUR 19.46.
- Pricing levels in 2009 are expected to rise throughout the industry, as a
result of a probable increase in reinsurance demand.
Denis Kessler, Chairman and Chief Executive Officer of SCOR, comments: "Our
current results and balance sheet strength demonstrate the effectiveness of
SCOR's strategy, which relies on high business and geographical
diversification and focuses on traditional reinsurance activity. This
policy produces very positive operating cash flows. The Group has no
liquidity issues and our current solvency strongly supports our rating.
However, the financial market turmoil may continue to affect the
performance of our investment portfolio in future quarters. SCOR is well
positioned to profit from an increase in reinsurance demand and an increase
in premium rates in the upcoming renewal season."
Group well positioned to benefit from higher prices in reinsurance
SCOR expects capital needs to increase insurers' demand for reinsurance,
because the subprime and credit crises and subsequent low investment market
performances, plus this year's above-average natural catastrophe activity,
have significantly reduced insurers' capital adequacy.
The industry meetings in Monte Carlo and Baden-Baden, leading up to the
2009 renewal season, confirmed SCOR Group's role as a reinsurer of choice.
The Group's pioneering "hub" structure ensures close proximity to local
markets and clients, along with the ability to provide customized
solutions.
Net income affected by equity impairments and above-average loss activity
SCOR records a net income of EUR 280 million in the first nine months of
2008, down 6.7% from EUR 300 million compared to last year's published and
adjusted1 figures for the same period. On a pro-forma basis, income is down
21.3% from EUR 356 million in 2007. The third quarter 2008 results have
been markedly affected by a difficult investment environment and above-
average natural catastrophe claims. Despite these developments, SCOR posts
a result of EUR 38 million in the third quarter of 2008. The year-to-date
return on equity (ROE) stands at 10.7%.
Net income for the first half of 2008 has been adjusted from EUR 225
million to EUR 242 million as a result of several positive factors, which
are mainly due to the finalization of the Converium acquisition and its
integration into SCOR's consolidated accounts.
SCOR shareholders' equity increased by 2% to EUR 3,506 million at 30
September 2008 from 30 June 2008. Book value per share stands at EUR 19.46
at the end of September.
Over the past four years, the Group has continually reduced its debt ratio
and currently has a leverage position of 18%. SCOR has no refinancing needs
at present, with a first debt coming to maturity in mid 2010.
Robust Life and Non-Life business results
The Group's gross written premiums reach EUR 4,325 million in the first
nine months of 2008, up 27.9% from EUR 3,381 million for the same period in
the previous year on a published and adjusted1 basis.
Non-Life gross written premiums rose to EUR 2,371 million in the first nine
months of 2008 from EUR 1,603 million in the first nine months of 2007,
representing an increase of 47.9% on a published and adjusted1 basis. On a
pro-forma basis and at constant exchange rates, premiums increase by 1.8%.
A Non-Life combined ratio of 99.2%, despite a year with above-average
natural catastrophes, demonstrates the strong quality of SCOR's business
book and confirms the capacity of the Group to absorb significant shocks
within a given reporting period, while delivering stable earnings. The
third quarter saw natural catastrophe claims of EUR 50 million after tax
from hurricanes Ike and Gustav. The USD 20 billion hurricane Ike is likely
to be the second largest US insured hurricane loss ever after Katrina. For
SCOR, the losses from hurricane Ike essentially came from the Group US Cat
treaty portfolio. This portfolio is protected by a specific excess of loss
retrocession program that will contain the total additional net impact in
the event that the initially estimated cost increases. The Eurotunnel loss
stands at EUR 35 million net of reinstatement premium and before tax. SCOR
Global P&C's Non-Life expense ratio further improves to 5.9% in the first
nine months, down from 7.1% for the same period in 2007.
Life gross written premiums for the nine months ended 30 September 2008
increase by EUR 176 million (+9.9%) to EUR 1,954 million, compared to EUR
1,778 million for the nine months ended 30 September 2007 on a published
and adjusted basis1. On a pro-forma basis and at constant exchange rates,
premium volume rises by 5.7%. Life reinsurance records an operating margin
of 6.5% for the nine months ended 30 September 2008, slightly down from
2007 due to a lower investment result. The technical component of SCOR'
Global Life's operating margin remains strong, driven by a high share of
European mortality business.
Continuing with a very cautious investment approach
In a challenging financial market environment, SCOR has further reinforced
its very prudent asset management policy. The Group's cash position, which
is well diversified across a limited number of banks and invested in
government securities, as well as short term investments, stands at EUR 3.2
billion at the end of September 2008, up from EUR 2.8 billion at the end of
June 2008 and EUR 2 billion at the end of 2007.
1 Taking into account the final integration of Converium into SCOR's
consolidated accounts
The Group can further build on a positive operating cash flow in the amount
of EUR 711 million year-to-date and on a highly liquid bond portfolio with
a duration of less than three years. The bond portfolio is expected to
generate additional EUR 2.5 billion of cash by the end of 2009.
In the first nine months of 2008, the adverse developments in the financial
markets have led to equity impairments worth EUR 97 million and bond
impairments of EUR 30 million (write-downs of Lehman and Washington Mutual
bonds in the amount of EUR 27 million), plus a net "fair value through
income" charge of EUR 17 million.
SCOR has not changed its investment accounting policy to take advantage of
the International Accounting Standards Board (IASB) reclassification of
financial instruments during the 3rd quarter of 2008.
Net invested assets including cash stand at EUR 19.1 billion on 30
September 2008, up from 18.5 billion on 30 June 2008 and flat from EUR 19.1
billion at year end 2007. SCOR realises a year-to-date investment yield of
3.0%.
On 30 September 2008, investments consist of bonds (38%, of which 69% in
AAA securities), cash and short-term investments (17%), funds withheld by
cedants (37%), equities (4%), hedge funds and other alternative investments
(2%) and real estate (2%).
Finalisation of the integration of Converium into the SCOR accounts
After one year, SCOR has successfully completed the acquisition and
integration of Converium. As a part of this completion SCOR announces the
finalisation of the initial accounting (PGAAP) for the Converium
acquisition, as required under IFRS 3. The initial goodwill reported as at
30 September 2007 was EUR 395 million, which increases to EUR 421 million
as at 30 June 2008, driven by the settlement of the class action.
At the end of the third quarter 2008 the goodwill related to the Converium
acquisition increases to EUR 578 million, mainly due to the de-recognition
of EUR 78 million of "Customer Relationship" intangible assets. SCOR has
been able to successfully retain the Converium portfolio (98% of client
retention by volume), with a very smooth integration process. It has now
become virtually impossible to fulfil IFRS controls and identification
criteria related to "Customer Relationship" intangible assets. This has no
impact on the tangible book value of the Company since these assets were
not treated as capital by rating agencies and regulators. In addition, SCOR
strengthened SCOR Global Life's GMDB (Guaranteed Minimum Death Benefit) run-
off Life reserves inherited from Converium following a detailed review of
the model and the refinement of assumptions, which increases goodwill by
EUR 67 million. Other adjustments led to an additional increase in goodwill
of EUR 15 million.
Consequently, these changes in the acquisition cost of Converium required
the net income for the first half of 2008 to be positively adjusted by EUR
17 million, including EUR 6 million for the de-recognition of "Customer
Relationship" intangibles, EUR 5 million for re-classification of certain
investments to "available for sale" and other items totalling EUR 6
million. Furthermore, as goodwill is not amortized and "Customer
Relationship" is, this will have a positive impact of EUR 11.4 million in
2009 and EUR 10.1 million in 2010 after tax.
1 Taking into account the final integration of Converium into SCOR's
consolidated accounts
Key Figures (in EUR millions)
+-------------------------+-----+-------------+-------------+-------------+
| | | 2008 | 2008 | 2007 |
+-------------------------+-----+-------------+-------------+-------------+
| | | 9 months| 9 months| 9 months|
+-------------------------+-----+-------------+-------------+-------------+
| | | Published1)| Published| Pro-forma2)|
+-------------------------+-----+-------------+-------------+-------------+
| | | (unaudited)| (unaudited)| (unaudited)|
+-------------------------+-----+-------------+-------------+-------------+
|Gross written premiums |4,325| 4,417| 1,577| 1,460|
+-------------------------+-----+-------------+-------------+-------------+
|Non-Life gross written |2,371| 2,469| 884| 829|
|premiums | | | | |
+-------------------------+-----+-------------+-------------+-------------+
|Life gross written |1,954| 1,948| 693| 631|
|premiums | | | | |
+-------------------------+-----+-------------+-------------+-------------+
|Operating income | 334| 508| 59| 185|
+-------------------------+-----+-------------+-------------+-------------+
|Net income | 280| 356| 38| 135|
+-------------------------+-----+-------------+-------------+-------------+
|Investment income | 445| 633| 97| 184|
+-------------------------+-----+-------------+-------------+-------------+
|Investment yield | 3.0%| 3.7%| 1.9%| |
+-------------------------+-----+-------------+-------------+-------------+
|Non-Life combined ratio |99.2%| 99.4%| 100.8%| 94.6%|
+-------------------------+-----+-------------+-------------+-------------+
|Non-Life technical ratio |93.3%| 92.3%| 95.7%| 88.3%|
+-------------------------+-----+-------------+-------------+-------------+
|Non-Life expense ratio | 5.9%| 7.1%| 5.1%| 6.3%|
+-------------------------+-----+-------------+-------------+-------------+
|Life operating margin | 6.5%| 7.5%| 5.1%| 6.7%|
+-------------------------+-----+-------------+-------------+-------------+
|Return on Equity (ROE) |10.7%| n.a.| 4.4%| |
+-------------------------+-----+-------------+-------------+-------------+
|Basic EPS (EUR) | 1.56| n.a.| 0.21| |
+-------------------------+-----+-------------+-------------+-------------+
| | | 2008| 2008| 2007|
+-------------------------+-----+-------------+-------------+-------------+
| | | 9 months| 9 months| 9 months|
+-------------------------+-----+-------------+-------------+-------------+
| | | Published1)| Published| Pro-forma2)|
+-------------------------+-----+-------------+-------------+-------------+
| | | (unaudited)| (unaudited)| (unaudited)|
+-------------------------+-- --+-------------+-------------+-------------+
|Investments (excl. |19,125 18,538 | | |
|participations) | | | | |
+-------------------------+-----+-------------+-------------+-------------+
|Reserves |18,887 17,967| | |
+-------------------------+-----+-------------+-------------+-------------+
|Shareholders' equity |3,506| 3,432| | |
+-------------------------+-----+-------------+-------------+-------------+
|Book value per share |19.46| 19.09| | |
|(EUR) | | | | |
+-------------------------+-----+-------------+-------------+-------------+
+-------------------------+-------------+-------------+--+--------------+
| | 2008 | 2008 | | 2007 |
+-------------------------+-------------+-------------+--+--------------+
| | 1st half| 3rd quarter| | 3rd quarter|
+-------------------------+-------------+-------------+--+--------------+
| | Published| Published1)| | Pro-forma2) |
+-------------------------+-------------+-------------+--+--------------+
| | (unaudited)| (unaudited)| | (unaudited) |
+-------------------------+-------------+-------------+--+--------------+
|Gross written premiums | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Non-Life gross written | | | | |
|premiums | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Life gross written | | | | |
|premiums | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Operating income | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Net income | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Investment income | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Investment yield | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Non-Life combined ratio | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Non-Life technical ratio | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Non-Life expense ratio | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Life operating margin | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Return on Equity (ROE) | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Basic EPS (EUR) | | | | |
+-------------------------+-------------+-------------+--+--------------+
| | 2008| 2008| | 2007 |
+-------------------------+-------------+-------------+--+--------------+
| | 1st half| 3rd quarter| | 3rd quarter|
+-------------------------+-------------+-------------+--+--------------+
| | Published| Published1)| | Pro-forma2) |
+-------------------------+-------------+-------------+--+--------------+
| | (unaudited)| (unaudited)| | (unaudited) |
+-------------------------+-------------+-------------+--+--------------+
|Investments (excl. | | | | |
|participations) | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Reserves | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Shareholders' equity | | | | |
+-------------------------+-------------+-------------+--+--------------+
|Book value per share | | | | |
|(EUR) | | | | |
+-------------------------+-------------+-------------+--+--------------+
1) Published accounts:
- The presented accounts for Q3 2008 results are unaudited and include full
consolidation of Converium and Revios for 2008
- 2007 comparative figures include Revios contribution (acquired on
21/11/2006) but do not include Converium (acquired on 08/08/2007)
Taking into account the final integration of Converium into SCOR's
consolidated accounts
2) Pro-forma information:
- The Group's financial information is prepared on the basis of IFRS and
interpretations issued and approved by the European Union as set out in the
2007 Document de Référence and Interim Report.
- The pro-forma financial information as of 30 September 2008 is unaudited
and presented to illustrate the effect on the Group's income statement of
the Converium acquisition as if the acquisition had taken place on 1
January 2007.
Forward-looking statements
SCOR does not communicate "profit forecasts" in the sense of Article 2 of
(EC) Regulation n degrees809/2004 of the European Commission. Thus, any
forward-.looking statements contained in this communication should not be
held as corresponding to such profit forecasts. Information in this
communication may include "forward-looking statements", including but not
limited to statements that are predictions of or indicate future events,
trends, plans or objectives, based on certain assumptions and include any
statement which does not directly relate to a historical fact or current
fact. Forward-looking statements are typically identified by words or
phrases such as, without limitation, "anticipate", "assume", "believe",
"continue", "estimate", "expect", "foresee", "intend", "may increase" and
"may fluctuate" and similar expressions or by future or conditional verbs
such as, without limitations, "will", "should", "would" and "could." Undue
reliance should not be placed on such statements, because, by their nature,
they are subject to known and unknown risks, uncertainties and other
factors, which may cause actual results, on the one hand, to differ from
any results expressed or implied by the present communication, on the other
hand.
Please refer to SCOR's document de référence filed with the AMF on 28 March
2008 under number D.08-0154 (the "Document de Référence"), for a
description of certain important factors, risks and uncertainties that may
affect the business of the SCOR Group. As a result of the extreme and
unprecedented volatility and disruption of the current global financial
crisis, SCOR is exposed to significant financial, capital market and other
risks, including movements in interest rates, credit spreads, equity
prices, and currency movements, changes in rating agency policies or
practices, and the lowering or loss of financial strength or other ratings.
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