SCOR gets big combined ratio boost in IFRS17, but warns on slow growth

Global reinsurance group  SCOR will record a roughly 87% P&C combined ratio in 2023 as the group translates pending performance into IFRS17 and works towards 0 to 2% gain in its new top line measure, officials indicated Wednesday.

Insurance revenues - the IFRS17 replacement for the array of premium measures under IFRS4 - could rise by up to 2% from the €7.4 billion which IFRS17 would have rendered on the 2022 books.

The old-school measure of gross written premium would be some 20% higher than the basic new insurance revenue format, SCOR estimates.

That fractional growth “should come as no surprise in 2023” with 2/3 of the book having been written during a 1/1 renewal season in which SCOR had retained a very conservative stance after 2022 losses, interim CEO François de Varenne told a briefing for market analysts. Likewise vis-a-vis SCOR's withdrawn approach to volume in H2 2022.

The group may yet step forward for new growth, but the bar appears to be set high.

“We are focused on profitability this year and not on growth,” de Verenne said. “We will take opportunities if pricing is right and we will keep our options open.”

For now, market conditions “continue to be very favourable.”

SCOR's assumed 87% P&C combined ratio in 2023 is a rough translation of what would have been a 95% reading under IFRS4.

The bulk of that accounting decline comes on expense measures including 3 points from a shift to more precisely attributable expenses and 4 points from the discounting of expected claims already being shifted into the revenue calculation.

The impact on the top line component of the combined ratio is thus mixed, with a ratio improvement from the exclusion of commissions and costs in revenues offsetting the claims discounting.

Against that overall ratio reduction, the catastrophe loss component is now up to 10 points from a prior 8.

But those profit and loss numbers rather stand as underlying assumptions to the new array of more formal financial guidance which SCOR has selected under IFRS17.

SCOR likes the ability of IFRS17 to reveal the economic value of its reinsurance portfolio and thus frames its over-arching goals against growth in economic value 7 percentage points over the risk-free rate and its solvency target (an optimal range of 185 to 220%).

Elsewhere on the pending earnings statements, SCOR expects 2 to 4% 2023 growth in life and health insurance revenue and an insurance service result - IFRS17's answer to technical profits - at €450 million.

New business in P&C will likely be written on the books with an expected contractual service margin - the unearned profit to be amortized over the contract period - of €750 million.

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