SCOR won’t bury 2023 profit hopes on depth of Q3 loss

Global reinsurer  SCOR need not bury its hopes for a 95% combined ratio in 2023 on account of the surge to 141% in Q3 2022 as Q3 included a slew of one-offs and much of the remaining volatility has already been written out of the book, a key official has argued.

“We feel confident about the net combined ratio target,” SCOR’s CEO for P&C Jean-Paul Conoscente (Pictured) told the Q3 investor call. “Right now, we have no plans to change budget.”

The Q3 shot to 141% came on the one-two punch of €517 million in Q3 nat cat plus €485 million in reserve padding.

Heightened volatility was also present in geopolitically-driven energy and aviation plus “remnants of the Brazilian drought” – all of which Conoscente considers exceptional to the earnings story. “We feel those are one-offs,” he said.

Normalised to exclude excess nat cat and the boost to reserves, Conoscente claims an underlying combined ratio at 99%. He then counts out man-made in energy and aviation to boast of an adjusted underlying combined ratio at or near the 95% target.

The nat cat side of the argument might have been solved already. Earnings volatility from natural catastrophe has been subject of “strong action” taken already throughout 2022 and “very favourable market conditions should help us further improve this situation,” Conoscente said.

“The rest of the portfolio is performing as expected so we feel pretty confident that going forward in 2023 we should see performance back to the 95% and below,” he said.

Work to date on nat cat is neither complete nor does it mean appetite could not rise if terms are right, officials nonetheless noted. Climate-impacted lines like property cat and agriculture remain dubious.

Nat cat appetite “very much depends on return on capital.” Those returns are “currently inadequate” but could merit fresh review if post-Ian pricing talk and structures, chiefly attachment points, start hinting at better returns, officials claimed.

Despite the confidence on outlook, SCOR officials proved quite contrite in presenting their Q3 financial results, including the €270 million Q3 net loss.  “We are not happy to present these results,” CEO Laurent Rousseau said.

Until the 95% combined ratio target is in sight, “it requires a repositioning of the business until we get there.”

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