The Covid-19 crisis had a EUR 456 million impact on SCOR's H1 2020 results

23 July 2020 — Daniela GHETU
Based on data currently available, the total estimated cost of the Covid-19 pandemic booked in Q2 2020 by French reinsurer SCOR reaches a total of EUR 456 million net of retrocession, net of reinstatement premiums and before tax, fully booked in the second quarter.

SCOR has applied its modeling expertise to conduct a thorough assessment of its exposures to the health, economic and financial impact of the Covid-19 pandemic. Out of the total estimated sum, the P&C side's contribution is of EUR 248 million, the Life segment accounts for EUR 194 million and the remaining EUR 14 million is related to the investment side.

The situation is as follows:

  • On the P&C side, the Group's exposure comes mainly from Credit, Surety & Political risks and from Property Business Interruption. The actual Covid-19-related claims received are limited, standing at a total of EUR 74 million1. The Group has estimated the "ultimate" cost of this pandemic at EUR 248 million, net of retrocession and reinstatement premium, and before tax. It is this estimated amount that has been fully booked in the Q2 accounts.
  • On the Life side, the actual Covid-19-related claims received as at June 30, 2020 are limited, standing at a total of EUR 63 million2. SCOR has estimated its exposure to the pandemic at June 30, 2020. The Group estimates the impact of the Covid-19 pandemic on its Protection book at EUR 194 million (net of retrocession and before tax). It is this estimated amount that has been fully booked in the Q2 accounts.
  • On the investment side, SCOR benefited from the defensive nature and very high quality of its investment portfolio when the Covid-19 pandemic started. The level of impairment charge4 remains limited in Q2 2020 at EUR 14 million before tax. The level of unrealized gains has increased by EUR 172 million between December 31, 2019 and June 30, 2020, despite
    EUR 62 million of realized gains largely coming from the real estate portfolio in Q1 2020.
The recent affirmations from Moody's, Fitch and S&P regarding SCOR's rating position, its solvency position well within the optimal 185% to 220% range and its ability to grow in the current crisis, highlight the Group's financial strength and the resilience of its global franchise. SCOR considers the Covid-19 pandemic to be a fully manageable earnings event for the Group, impacting its annual results without eroding its capital position.

The main H1 2020 results as provided by SCOR are:

  • Gross written premiums total EUR 8,195 million in H1 2020, up 1.0% at constant exchange rates compared with H1 2019 (up 2.3% at current exchange rates).
  • SCOR Global P&C gross written premiums are up 0.9% at constant exchange rates compared with H1 2019 (up 2.1% at current exchange rates). SCOR Global P&C's H1 2020 technical profitability is impacted by Covid-19 with a combined ratio of 102.3%.
  • SCOR Global Life gross written premiums are up 1.0% at constant exchange rates compared with H1 2019 (up 2.5% at current exchange rates). SCOR Global Life records a technical margin of 5.4% in H1 2020, including the impact of the Covid-19 pandemic.
  • SCOR Global Investments delivers a strong return on invested assets of 2.6% in H1 2020, benefiting from capital gains and commencing the progressive redeployment of Group liquidity.
  • The Group cost ratio, which stands at 4.7% of gross written premiums, is better than the "Quantum Leap" assumption of ~5.0%.
  • The Group net income stands at EUR 26 million for H1 2020. The annualized return on equity (ROE) stands at 0.8%, 23 bps above the risk-free rate5.
  • Group net operating cash flows stand at EUR 343 million in H1 2020, with contributions from both SCOR Global Life and SCOR Global P&C. The Group's total liquidity is very strong, standing at EUR 2.8 billion at June 30, 2020.
  • Shareholders' equity stands at EUR 6,392 million at June 30, 2020, up by EUR 18 million compared with December 31, 2019. This results in a strong book value per share of EUR 34.19, compared to EUR 34.06 at December 31, 2019.
  • Financial leverage stands at 25.9% on June 30, 2020, improving by 0.5% points compared to December 31, 2019. Allowing for the intended call of a subordinated debt6 callable on October 20, 2020, the adjusted financial leverage ratio would be 24.9%.
  • The Group's estimated solvency ratio stands at 205% on June 30, 2020, well within the optimal solvency range of 185% - 220% as defined in the "Quantum Leap" strategic plan. The fall in this ratio compared to December 31, 2019 was mainly driven by market movements (changes in interest rates, exchange rates and credit spreads), and to a lesser extent by the estimated impact of Covid-19.
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More details are available on the Group's website.

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