Moody’s Investors Service downgraded the Insurance Financial Strength Rating (IFSR) of SCOR SE and its key operating entities to A1 from Aa3 while at the same time changing the company’s outlook to stable from negative.
On Oct. 13, 2022, Moody’s changed SCOR’s outlook to negative from stable, following a weakening in the group’s performance in the first six months of the year, which continued in the third quarter. Then on Jan. 26, 2023, SCOR announced the replacement of its CEO, stressing the need to develop and implement a new comprehensive strategic plan, which has been a key strength of the group in the past.
The downgrade of SCOR’s IFSR rating reflects the recent weakening of the group’s profitability and Moody’s expectation that the group’s senior management will likely be faced with a high level of scrutiny from both external stakeholders, namely clients and investors, and internal stakeholders, which will increase execution risk in implementing a new strategic plan.
With regards to profitability concerns, SCOR’s results for the third quarter of 2022 showed a further weakening of the group’s earnings, reflected in a net loss of €509 million ($547.7 million) for the first nine months of the year, Moody’s explained. SCOR’s solvency remained at very strong levels, at 217 percent, and thus at the upper end of what the group defines as its optimal range, but Moody’s noted “that positive market movements strengthened the ratio by 43 percentage points over the first nine months.”
Nevertheless, the stable outlook reflects Moody’s expectation that SCOR will maintain its strong franchise both in the global property/casualty and life reinsurance sector. It also reflects the rating agency’s expectation that SCOR will be able to gradually improve its profitability, both in terms of earnings levels and volatility, and maintain capital adequacy within its target range.
While the SCOR board has taken proactive action, Moody’s expected it will take time for senior management to rebuild the group’s track record. More positively, Moody’s said the new CEO has a strong track record and is highly experienced in the sector with expertise in both life and property/casualty reinsurance, which positions him well to run the group going forward. (SCOR appointed Swiss Re’s Chief Underwriting Officer Thierry Léger as its new CEO, effective on May 1, 2023.)
Management’s track record is a key consideration in Moody’s assessment of private companies’ governance under its ESG methodology, and given the aforementioned considerations, Moody’s has changed its assessment of SCOR’s governance to an Issuer Profile Score of moderately negative (G-3).