PARIS LA DEFENSE, FRANCE -- 05/07/08 --
Press Release
07 May 2008
For further information, please contact:
Beat Werder +33 (0)1 46 98 71 39
Chief Communications Officer
Marco Circelli +33 (0)1 46 98 72 17
Head Investor Relations
SCOR realises strong net income of EUR 124 million in the First Quarter
2008, up 63% despite a challenging financial environment
SCOR records strong results, carrying its profitability momentum into 2008.
A strong business performance in Non-Life and Life more than offsets a
decrease in investment income due to a challenging financial market
environment. The quarter also saw the positive resolution of two key legacy
matters.
- Strong net income year-to-date of EUR 124 million, up 63% compared to the
first three months of 2007 on a published basis. On a pro forma basis, the
increase would have been 46%. Annualised return on equity (ROE) reaches
14.6% and earnings per share (EPS) moves up to EUR 0.69.
- Solid underlying business performance: Non-Life combined ratio of 98.8%
despite above-average natural catastrophe activity over the quarter. Life
business records strong operating margin of 7.9%.
- Sustained profitability in the on-going US P&C business, combined with
positive commercial developments, leads to the reactivation of EUR 44
million of deferred tax assets.
- Top-line performance with year-to-date 2008 gross written premiums at
EUR 1,353 million, up 30% compared to the first three months of 2007 on a
published basis.
- Solid April 2008 P&C renewals in the Asia-Pacific region, successfully
aggregating the ex-Converium lines whilst maintaining strict underwriting
discipline and optimizing the risk profile of the Group.
- Cautious investment approach reinforced by strong cash position of EUR
2.8 billion, return on net invested assets attains 3%
year-to-date impacted by negative EUR 35 million equity market investment
result.
- Shareholder equity reaches EUR 3.6 billion at 31 March 2008 including
minorities, despite adverse foreign exchange movements. Book value per
share stands at EUR 19.84.
- Positive resolution of key legacy matters: agreement to settle Converium
class action for EUR 74 million (pre tax and before D&O recoveries), with
no expected net impact on current period earnings but only on goodwill, and
transactional recovery of the guarantee from Groupama pertaining to the EUR
240 million SOREMA acquisition, whose net negative impact on the First
Quarter 2008 accounts of EUR 7 million is compensated by future investment
returns.
Denis Kessler, Chairman and Chief Executive Officer of SCOR, comments: "The
first three months of 2008 have confirmed the strength of the business
platform created by SCOR. Even in a quarter of high natural catastrophe
activity and financial market turmoil, SCOR can rely on its twin business
engines of Life and Non-Life and its cautious investment practices. The
agreements to resolve the pending litigation matters, especially the class
action litigation in the United States, allow the Group to fully focus on
integration, synergy creation and delivery in line with the strategic
'Dynamic Lift' plan".
Strong net income despite above-average natural catastrophe events and
turmoil in the financial markets
SCOR records a net income of EUR 124 million in the 1st quarter of 2008, up
63% compared to last year's published figures. The results are positively
affected by a EUR 44 million reactivation of deferred tax assets, which
demonstrates the ongoing positive contribution of the SCOR Global P&C
entity in the United States. On a pro forma basis, consolidating Converium
since 1 January 2007, income is up 46%. This positive result in a quarter
affected by a tough investment environment and above-average natural
catastrophe claims (EUR 45 million or 6.8% of combined ratio) demonstrates
the success of SCOR's current franchise, as affirmed by a strong return on
equity of 14.6% on an annualized basis.
SCOR's shareholder equity decreases slightly to EUR 3,588 million as of 31
March 2008, again supported by positive net income which partially offsets
adverse foreign exchange impacts on net asset value of non-Euro denominated
subsidiaries. On 31 March 2008 the Group book value per share stands at EUR
19.84 with earnings per share at EUR 0.69, up by 5% on a published and 47%
on a pro-forma basis.
The Group's overall tax charges benefit from the reactivation of US
deferred tax assets. Without this effect the tax rate for the quarter would
have been 19.9%, positively affected by a strong income contribution from
low tax jurisdictions.
Non-Life business records combined ratio of 98.8%
The Group's gross written premiums reach EUR 1,353 million in the first
three months of 2008, up 30% against the previous year on a published
basis.
In the Non-Life sector, gross written premiums rise to EUR 736 million in
the first three months of 2008 from EUR 474 million in the first three
months of 2007, representing an increase of 55% on a published basis. On a
pro-forma basis and at constant exchange rates, premiums decrease by 2%, in
line with the January renewals.
A Non-Life combined ratio of 98.8%, despite a quarter with
above-average natural catastrophes, demonstrates the strong underlying
quality of the book and confirms the restored capacity of the Group to
absorb medium-sized shocks within a given quarter and deliver stable
earnings. The losses arising from various natural catastrophes such as
floods in Australia and European and Chinese winter storms amount to EUR 45
million.
On a pro forma basis, the combined ratio nonetheless improves by 3.9
percentage points, driven largely by the fact that 2007 was impacted by the
Kyrill winter storm.
SCOR's Life segment contributes EUR 617 million in premium volume during
the first three months, up 9% compared to the previous year on a published
basis. At constant exchange rates and on a pro forma basis, premiums
increase by 1.4%. The Life operating margin is slightly higher at 7.9% for
the 1st quarter 2008, moving up from 7.8% in the previous year on a
published basis and remaining flat on a pro forma basis.
Cautious investment approach reinforced
SCOR is applying a very prudent asset management policy. The strong cash
position of the Group stands at EUR 2.8 billion by the end of March 2008,
up from EUR 2 billion at the end of 2007.
Net invested assets including cash stand at EUR 18.5 billion on 31 March
2008, down from EUR 19.1 billion at year end 2007, mainly driven by
exchange rates. SCOR realises a return of 3% on average assets, down from
4.6% in the previous year. Adverse developments in the equity markets have
a negative impact in the quarter of EUR 35 million with EUR 17 million of
impairments, EUR 5 million of realized losses and EUR 13 million of fair
value movements net of currency gains. This is partially offset by realized
gains on the bond portfolio of EUR 23 million.
On 31 March 2008, investments consist of bonds (37%), of which 70% in AAA
securities, cash and equivalents (15%), funds held by cedants (39%),
equities (5%), hedge funds and other alternative investments (2%) and real
estate (2%).
SCOR confirms its limited exposure to subprime of EUR 46 million (0.2% of
total investments). All structured product investments have been performing
and providing expected cash flows; no impairment was recorded on this
investment class in the first quarter.
Solid April 2008 renewals in Asia
SCOR Global P&C continues its selective and disciplined underwriting
approach with the 1st April renewals in the
Asia-Pacific markets, notably in South Korea and Japan. Almost 10% of all
treaty business was up for renewal. In a market environment characterized
by low single-digit pricing reductions, the Company wrote and bound
Non-Life contracts of EUR 196 million, a small increase of 1% against 2007
on comparable basis. The successful integration of the ex-Converium lines
re-affirmed the client franchise whilst maintaining strict underwriting
discipline. New and restructured business amounts to EUR 17 million.
Business of EUR 19 million was not renewed as it did not meet set
profitability standards. The Group decreased its wind exposure in Japan. At
the same time, it strongly increased its engineering and agriculture book
(+43% and +20% respectively) fuelled by the investment growth in the area
and by higher commodity price levels.
Important resolution of legacy matters, notably class action litigation in
the United States
In the 1st quarter of 2008, SCOR Holding (Switzerland) AG, formerly known
as Converium Holding AG ("Converium"), entered into an agreement to settle
claims asserted by purchasers of Converium securities who had alleged that
Converium misrepresented and omitted material information in various public
disclosures. These claims were originally asserted in a class action
lawsuit filed in the United States in 2004 against Converium and certain of
its former officers. The plaintiffs in that lawsuit sought to represent a
class of all purchasers of Converium securities during the period between
December 2001 and September 2004. The US court, however, limited the class
to US-resident purchasers of Converium securities and purchasers of
Converium ADS in the US during the period between January 2002 and
September 2004, and the plaintiffs asked the court to reconsider that
decision. While that request was pending, SCOR reached an agreement to
settle the claims of the certified class before the US court and the claims
of non-US purchasers of Converium securities in a proceeding in the
Netherlands for an aggregate amount of EUR 74 million (pre tax and before
D&O recoveries). SCOR intends to launch arbitrations with D&O insurers in
order to maximize the recoveries. SCOR has booked conservative recoveries.
The settlement is expected to have no impact on current year earnings or
EPS and will lead to an increase of EUR 35 million in the goodwill related
to the Converium acquisition as stated in the 2007 year-end accounts (or
EUR 14 million added to the original goodwill of Q3 2007). These
settlements require court approval in the US and the Netherlands
respectively.
SCOR also reached an agreement with Groupama regarding the definitive
amount of a guarantee relating to the acquisition of SOREMA by SCOR in
2001. At the time, SOREMA was the reinsurance subsidiary of Groupama. The
guarantee contemplated that Groupama would indemnify SCOR in the event of
negative developments concerning the technical reserves of SOREMA entities
for all underwriting years up to and including 2000. The parties agreed on
a payment of EUR 240 million to occur on 1 June 2008. SCOR's 2007 accounts
included a recoverable of EUR 250 million. The net negative impact on the
First Quarter 2008 accounts amounted to EUR 7 million, which should be
compensated by future investment returns on EUR 240 million.
Next disclosure dates:
4 June 2008: SCOR Life Embedded Value
2 July 2008: SCOR Investors' Day
27 August 2008: SCOR H1 2008 results presentation
Key Figures (in EUR millions)
+------------------------+--------+-------------+-------------+-----------+
| | | 2008 | 2008 | 2007 |
| | | | | |
| | | | | |
+------------------------+--------+-------------+-------------+-----------+
| | | 1st quarter| 1st quarter|1st quarter|
+------------------------+--------+-------------+-------------+-----------+
| | | Published1)| Published| Published|
+------------------------+--------+-------------+-------------+-----------+
| | | (unaudited)| (unaudited)|(unaudited)|
+------------------------+--------+-------------+-------------+-----------+
|Gross written premiums | 1,353| 1,040| 1,425| -0.6%|
+------------------------+--------+-------------+-------------+-----------+
|Non-Life gross written | 736| 474| 791| -2.2%|
|premiums | | | | |
+------------------------+--------+-------------+-------------+-----------+
|Life gross written | 617| 566| 634| +1.4%|
|premiums | | | | |
+------------------------+--------+-------------+-------------+-----------+
|Net earned premiums | 1,223| 895| 1,263| +2.9%|
+------------------------+--------+-------------+-------------+-----------+
|Operating income | 115| 127| 140| -12.1%|
+------------------------+--------+-------------+-------------+-----------+
|Net income | 124| 76| 85| +63.5%|
+------------------------+--------+-------------+-------------+-----------+
|Investment income | 152| 168| 202| |
+------------------------+--------+-------------+-------------+-----------+
|Investment yield | 3.0%| 4.6%| 3.9%| |
+------------------------+--------+-------------+-------------+-----------+
|Non-Life combined ratio | 98.8%| 97.7%| 102.7%| |
+------------------------+--------+-------------+-------------+-----------+
|Non-Life technical ratio| 92.0%| 90.3%| 93.8%| |
+------------------------+--------+-------------+-------------+-----------+
|Non-Life expense ratio | 6.8%| 7.4%| 8.9%| |
+------------------------+--------+-------------+-------------+-----------+
|Life operating margin | 7.9%| 7.8%| 7.9%| |
+------------------------+--------+-------------+-------------+-----------+
|ROE | 14.6%| 14.0%| 10.0%| |
+------------------------+--------+-------------+-------------+-----------+
|Basic EPS (EUR) | 0.69| 0.66| 0.47| |
+------------------------+--------+-------------+-------------+-----------+
| | | 2008| 2008| 2007|
| | | | | |
| | | | | |
+------------------------+--------+-------------+-------------+-----------+
| | | 1st quarter| 1st quarter|1st quarter|
+------------------------+--------+-------------+-------------+-----------+
| | | Published1)| Published| Published|
+------------------------+--------+-------------+-------------+-----------+
| | | (unaudited)| (unaudited)|(unaudited)|
+------------------------+--------+-------------+-------------+-----------+
|Investments | 18,539| 19,093| | |
+------------------------+--------+-------------+-------------+-----------+
|Reserves | 17,725| 18,047| | |
+------------------------+--------+-------------+-------------+-----------+
|Shareholders' equity | 3,588| 3,628| | |
+------------------------+--------+-------------+-------------+-----------+
|Book value per share | 19.84| 19.99| | |
|(EUR) | | | | |
+------------------------+--------+-------------+-------------+-----------+
+-------------------------+-----------+-------------+--+-----------------+
| | 2007 | 2007 | |Variation at |
| | | | |constant exchange|
| | | | |rates |
+-------------------------+-----------+-------------+--+-----------------+
| | Full Year| 1st quarter| | |
+-------------------------+-----------+-------------+--+-----------------+
| | Published| Pro-forma2)| | |
+-------------------------+-----------+-------------+--+-----------------+
| | (audited)| (unaudited)| | |
+-------------------------+-----------+-------------+--+-----------------+
|Gross written premiums | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Non-Life gross written | | | | |
|premiums | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Life gross written | | | | |
|premiums | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Net earned premiums | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Operating income | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Net income | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Investment income | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Investment yield | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Non-Life combined ratio | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Non-Life technical ratio | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Non-Life expense ratio | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Life operating margin | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|ROE | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Basic EPS (EUR) | | | | |
+-------------------------+-----------+-------------+--+-----------------+
| | 2007| 2007| |Variation at |
| | | | |constant exchange|
| | | | |rates |
+-------------------------+-----------+-------------+--+-----------------+
| | Full Year| 1st quarter| | |
+-------------------------+-----------+-------------+--+-----------------+
| | Published| Pro-forma2)| | |
+-------------------------+-----------+-------------+--+-----------------+
| | (audited)| (unaudited)| | |
+-------------------------+-----------+-------------+--+-----------------+
|Investments | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Reserves | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Shareholders' equity | | | | |
+-------------------------+-----------+-------------+--+-----------------+
|Book value per share | | | | |
|(EUR) | | | | |
+-------------------------+-----------+-------------+--+-----------------+
1) Published accounts:
- Full consolidation on 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)
2) Pro-forma information:
- Following IFRS 3 guidance - an acquirer shall disclose information that
enables users of its financial statements to evaluate the nature and
financial effect of business combinations that were effected during the
period
- The unaudited pro-forma financial information as of 31 March 2008 is
presented to illustrate the effect on the Group's income statement of the
Converium acquisition as if the acquisition had taken place on 1st January
2007
Note: All figures are provided and all comparisons drawn at exchange rates
as at March 31, 2008
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 March
28, 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.
This information is provided by HUGIN
