Scor has posted better than expected Q1 21 results. Although weak on an absolute basis, they leave room for optimism and potential to recover from a defensive stock performance against its peers.
Companies: SCOR (SCR:EPA)Scor SE (SCR:PAR)
Scor posted a positive Q4 20, with a jump in its net income to €99m. FY 20 net profit was €234m, -44.5% yoy. The top line was stable, at €16,368m. The reinsurer absorbed the cost of COVID-19, estimated at 3.7% in terms of Life technical margin and 0.7% in the combined ratio. The Solvency II ratio stands at 220%, allowing a dividend of €1.8/share. 2021 would be better with the recent improvement in prices and clearer terms in contracts.
Scor announced positive results in its P&C renewal campaign. The reinsurance treaty premium income improved by 15.9% to €3,445m, with an overall average price increase of 7.8%. This is promising for 2021 profitability, mainly with expected further price increases. However, the profitability of Scor is also conditioned by its Life book and the continued spread of the UK variant of Coronavirus in the US should put pressure on its operating earnings, at least in H1 21.
Companies: Scor SE
Scor has selected Benoît Ribadeau-Dumas as the next CEO to succeed Denis Kessler in 2022. He has strong industrial and political roots but no background in the reinsurance industry. Denis Kessler will also remain as the Chairman of the group and a resolution to this effect will be submitted at the 2021 General Meeting. This means that the veteran CEO will continue to be the reinsurer’s strong man for years to come.
Scor posted 2.3% growth in its premiums to €12,283m but a drop in net income (€135m ytd). The bill due to the pandemic is heavy in 9M 20 at €256m on the P&C side (€8m in Q3 20) and €251m on the Life side (€57m in Q3), of which €233m in claims from the US mortality portfolio. The Wave 2 of COVID-19 should not affect the accounts in the same way as in H1 20, but Q4 risks could come from NatCats.
Scor has adjusted its strategic targets for 2020, taking into consideration the COVID-19 pansemic. The good news was the lower than booked emerging Life claims in the US (€182m booked in the H1 20 accounts vs. €85m paid up to August) and the positive pricing dynamic in the P&C lines. In asset management, the portfolio remains very liquid with €8.7bn of cash flows expected over the next 24 months. However, this is a big challenge given the low reinvestment rates.
The reinsurer posted Q2 net income of €-136m, hit by high claims reserve provisions of €456m to cover the COVID-19 impact. However, this amount exceeds 3x the observed real impact until the end of June 2020 that stood at €151m. The exposure to the US market was behind the extreme cautiousness of management (€182m of reserves). The capital position remains solid with a Solvency II ratio at 205%.
Scor posted an improvement in its gross premiums (up 2.2% at constant FX to €4,158m) and net income (up 23.7% to €162m). The reinsurer continued to increase its business volume while reducing risks. In asset management, Scor has frozen its reinvestment activity, awaiting for better yields and lower volatility. The impact of COVID-19 is not material for the moment, but we expect higher claims in Q2. We keep our cautious figures with a drop in FY 20 earnings.
Scor posted FY 19 net income of €422m, lower than expected. The Q4 was marked by high retrocessions particularly in the Life business, reflecting the company’s intention to reinforce its protection against risks. Management reiterated it had no external growth strategy in the absence of a serious industrial project. Shareholders’ attitude would depend on the achievement of the marriage of Covéa with PartnerRe. The reinsurer said that Coronavirus would have no impact on the 2020 figures. The prop
Covéa seems to be interested in PartnerRe, the reinsurer of Exor. According to Insurance Insider, the holding company would consider any offer with a valuation of $8bn. Covéa would not be able to pay such a price. However, this manœuvre of Thierry Derez could be a means to destabilise Denis Kessler before the coming shareholders general meeting.
Scor’s net income reached €401m in 9M 19, +17.2% yoy. Gross written premiums increased by 3.2% at constant FX to €12,055m. The operating earnings were stable at €667m. For the P&C business, the combined ratio worsened to 95.7%, reflecting the impact of Hurricane Dorian (€92m) and Typhoon Faxai (€89m). In the Life business, the technical margin was 7.3%. The ROIA improved to 3%. The solvency II ratio was 203%. We keep our positive opinion on the reinsurer and we are expecting a positive Q4.
Yet again, CIAM has hit out against the governance quality of Scor and urged the Board members to protect the interest of its shareholders from the practices of Mr Denis Kessler. The activist fund is clearly preparing for the next general meeting, by putting the CEO and all the Board under pressure. We expect that CIAM will reiterate the same resolution it proposed at the last shareholders’ meeting.
After the completion of the strategic plan Vision in Action, Scor announced this morning its new plan Quantum Leap. The reinsurer has kept the same growth pace targets over July 2019- December 2021, while investing €250m in digitalisation and the preparation of the company for IFRS 17.
Scor’s net income reached €286m, up 9.2% yoy. However, we have to take into consideration that, without the implementation of a new operational structure in the US, the H1 18 would have stood at €324m. We expect a positive H2 19, mainly with a satisfactory development in sales and a cautious approach to the US cat business. The strategic plan’s targets were achieved and investors are waiting for the new guidance, to be revealed in September. Our opinion is still positive.
Scor posted a 16.1% jump in its P&C premiums to €1,718m, while its Life sales followed a downturn trend (-1.1% to €2,267m) after the integration of the revenues of the Financial Solutions’deals now reported within fees rather than premiums. This led to an improvement in the technical margin to 7.2%, while the combined ratio remained within the targeted 95-96% range. Shareholders supported Denis Kessler at the AGM but the reinsurer is likely to propose an attractive development plan in September.
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Companies: Primary Health Properties PLC
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