Reinsurer SCOR reported a first-half loss attributed to the war in Ukraine, natural catastrophes and the severe drought in Brazil.
The H1 loss of €239 million (US$242.6 million), compares with net income of €380 million ($385.8 million) reported during the same period in 2021, SCOR said, noting that €159 million ($161.4 million) of the H1 2022 loss was incurred in the second quarter compared with a profit of €335 million ($340.1 million) in Q2 2021.
The H1 net combined ratio stands at 107.7, including natural catastrophes equivalent to 10.5 percent of net earned premium. This compares with a net combined ratio of 97.2 in H1 2021. (A combined ratio above 100 indicates an underwriting loss.)
“H1 2022 has been marked by a series of exceptional events both in L&H and in P/C, which have negatively impacted our financial performance. Most notably, a number of events driven by climate change (natural catastrophes, droughts, etc.) have affected the profitability of our P/C business, confirming that our strategy to decrease our exposure to these events is the right one,” commented Laurent Rousseau, chief executive officer of SCOR, in a statement. “Despite an accounting loss, SCOR’s solvency position remains stable and robust with a solvency ratio of 240 percent.”
The group’s overall gross written premiums were €9.7 billion ($9.9 billion) during H1 2022 , up 8.3 percent from H1 2021, while SCOR’s Property/Casualty division saw its H1 GWP rising 20.9 percent at constant exchange rates compared with the first half of 2021.
At the June and July P/C reinsurance renewals, gross reinsurance premiums decreased by 9.8 percent, which is attributed in part to a significant decrease (-24 percent) in the U.S., where SCOR has reduced its exposure to natural catastrophes, most notably in Florida. On the other hand, during these renewals, SCOR saw growth in Europe (+16 percent), mature APAC (+5 percent) and fast growth markets (+7 percent), where SCOR is benefiting from high demand. SCOR achieved an average pricing increase of 6.7 percent, reflecting a hardening market in an inflationary environment.
While SCOR is adopting a more selective approach in Reinsurance P/C lines, SCOR said it continues to grow its Reinsurance Global Lines and Specialty insurance portfolios, where market conditions are seen as attractive.
SCOR said it is preparing a new strategic plan that will be unveiled in November together with its Q3 results.
War in Ukraine, Inflation, Climate Change
“In the first half of 2022, the global macroeconomic environment strongly deteriorated, as tensions driven by the war in Ukraine and the related sanctions grew regarding the supply of natural resources,” the reinsurer said in a statement.
“Many countries are now experiencing levels of inflation that had not been observed in decades,” it continued.
SCOR said the provision related to potential claims from the war in Ukraine, which was booked in the first quarter of 2022, remains unchanged at €85 million ($86.3 million).
In H1 2022, the impact of climate change continued to be felt, said SCOR, pointing to heavy floods in South Africa and storms in France during the second quarter, which followed a first quarter that had already been affected by severe floods in Australia and the worst drought in Brazil in 91 years.
Brazil’s drought affected corn and soy crops in the southern regions of Brazil, which had a €193 million impact on SCOR’s technical result, of which €35 million ($35.5 million) was incurred in the first quarter. “As a consequence, and consistent with its ambitions to reduce its exposure to climate-sensitive events, SCOR has been fully reviewing its agriculture portfolio with a 50 percent exposure reduction (PML) targeted for 2023.”
In the first half of 2022, the COVID-19 pandemic also continued, bringing claims of €254 million ($257.9 million), of which €195 million ($198 million) was incurred in the first quarter.
SCOR said its H1 casualty results were also hit by the materialization of latent claims related to sexual molestation from 1978 to 1985, equaling €76 million ($77.2 million).