Laurent Rousseau, Chief Executive Officer of SCOR, comments: "SCOR's franchise has never been stronger, the Group is poised to reap the benefits of its leadership position and seize the attractive long-term growth opportunities emerging from the fast-changing risk environment. The Group Executive Committee is focused on delivery and operational improvement to create sustainable, franchise-strengthening value for our shareholders. In the next strategic plan, to be unveiled in March 2022, we will focus on Culture & People, Business Leadership, and Financial Performance to transform the Group and build a differentiated value proposition for all stakeholders."
SCOR builds on its leadership position as a global tier 1 reinsurer, which relies on its four tested strategic cornerstones (a robust capital shield, a strong franchise, a high diversification, and a controlled risk appetite), as it embarks in its next chapter and adapts to a fast-changing environment.
SCOR takes proactive actions to create sustainable shareholder value, focusing on delivery and operational performance improvement:
- The recent Life transaction delivers immediate value, while increasing the Group's degrees of freedom for value accretive capital deployment in the P&C business.
- P&C: in an attractive market, estimated GWP growth for 2022 is revised upwards to 15% 18% from 4-8% in "Quantum Leap", with a net combined ratio trending towards 95% and below. This absorbs a Nat Cat budget increase from 7% to 8% for 2022 to reflect an increasingly volatile environment. Going forward, SCOR will adopt a forward-looking approach to estimate its Nat Cat budget.
- Life: SCOR continues its focus on value and impact. The recent Life in-force transaction reduced the share of US mortality business by c. 20%. The assumption for the 2022 net technical margin (excluding potential Covid-19 impacts) is revised upwards by 100 bps to 8.2% 8.4%, while the GWP growth for 2022 is revised downwards from +3-6% to +~1%.
- Investments: SCOR intends to reduce its excess liquidity from 16% to 9% by year-end and actively continues diversification into accretive value-creation assets. The Group expects a return on invested assets of 1.8% 2.3% for 2022.
SCOR Global P&C accelerates its development in the current hardening market environment
SCOR Global P&C successfully delivers upon the key pillars of the "Quantum Leap" strategic plan based on redeploying capital in value-creative segments and clients, growing P&C Partners as an innovation enabler, and accelerator as well as fostering operational excellence, and building a 360? risk taking platform. While the profitability has been impacted by the Covid-19 shock and an elevated CAT activity, SCOR's exposures are in line with its peer group.
SCOR Global P&C is ready to accelerate its development in the current hardening market environment, with an increased focus on non-Natural Catastrophe lines of business. The outlook for the P&C (re)insurance market is attractive and sustained by strong fundamentals. In Reinsurance, there are strong growth opportunities in Europe, Fast Growth Markets, and Global Lines, with the best market dynamics in a decade. Specialty Insurance remains the most attractive segment of the market, the share of this business unit is expected to trend towards 30% of SCOR Global P&C's gross written premiums. The increased capital allocated to P&C will accelerate planned growth at a very attractive point in the cycle. SCOR Global P&C will pro-actively reduce the adverse impact of Nat Cat volatility on its portfolio by limiting growth on Cat business, as well as further optimizing the P&C retrocession program in 2022 to better cover against Cat frequency claims.
Leveraging the improving market conditions, in 2022, SCOR Global P&C expects to deliver stronger growth than provided for in "Quantum Leap". SCOR Global P&C's revised assumptions for 2022 are:
- An Estimated Gross Premium Income1 growth between+15% to +20%2, translating into Gross Written Premium growth between 15% to 18%2 at constant exchange rates;
- A combined ratio trending down to ~95% and below, better than the "Quantum Leap" assumption of ~95% to 96%, with an increase in the nat cat budget from 7% to 8% to reflect the influence of climate change and rising trends of mid-sized catastrophic events.
SCOR Global Life is successfully executing on the "Quantum Leap" plan while absorbing the Covid-19 pandemic costs thanks to its large, global and diversified franchise.
The pandemic has accelerated the transformation of the Life insurance industry with changing consumer demands and a massive increase in digitalization. SCOR Global Life's offering has transformed with a much richer Purpose-driven proposition to clients leading to deeper strategic relationships. Its value proposition focuses on value and impact and is enabled by an operational transformation based on agility and technology, leaving the business unit well positioned to build the future of insurance.
Looking forward, the financial impact of Covid-19, largely driven by the US, will remain manageable although 2021 impacts will be higher than expected due to the emergence of the delta variant. However, the impact on the reinsured population is still expected to be significantly lower than on the general population with vaccines continuing to give strong protection from severe Covid-19. While much uncertainty remains in the short term, learnings from past pandemics would suggest long-term positive impacts on mortality driven by advances in the healthcare and pharmaceutical industries.
SCOR Global Life's revised assumptions are:
- Gross Written Premium for 2022 up 1.0% at constant exchange rates, pursuing profitable growth in the core protection business of 3-4% and focusing on markets where SCOR Global Life can have an impact;
- Net technical margin for FY2021 estimated at ~10%, or between 5.5% and 6.0% excluding the "day one" impact from the recent in-force transaction;
- New run rate of 8.2%-8.4%, excluding Covid-19 impact, for the net technical margin in 2022 (vs 7.2%-7.4% provided for in "Quantum Leap") reflecting faster profit emergence following the in-force transaction. This net technical margin increase is non-dilutive on 2022 earnings;
- Maintaining a strong value creation with an annual VNB3 above EUR 300 million over 2021 and 2022.
SCOR Global Investments delivers on its commitment to act as a responsible investor. SCOR is finalizing the reinvestment of its excess liquidity into corporate bonds exposure by the end of 2021 and actively diversifies invested assets into value-creation assets (private equity, private debt and infrastructure), which are expected to represent over 10% of total invested assets by the end of 2022. Under current market conditions, the return on invested assets is expected to be between 1.8% and 2.3% for the full year 2022.
SCOR expands its third-party asset management franchise and is actively preparing for the transition to IFRS 9 on January 1, 2022.