The second quarter of 2020 could prove to be a “material catalyst” for Scor with the bulk of the French reinsurer’s Covid-19-related US life insurance claims expected to be recorded over the period, according to investment bank Jefferies.

Denis Kessler – Scor

In a note ahead of Scor’s 23 July half year financial results, Jefferies analyst Philip Kett reiterated previous guidance that recent dividend disappointments and the “exceptionally high” standard deviation in the potential impact of the virus on  life insurance “makes it difficult to justify a new investment in Scor”.

The carrier’s Paris-listed shares have been some of the hardest hit in the coronavirus driven first quarter sell-off in global equities, with its outsized US life reinsurance exposures weighing heavily on valuations.

Scor’s share price has also come under pressure ever since French mutual Covéa walked away from a possible deal following fierce resistance from the reinsurer’s management.

“One way or another, we expect 23rd July to be decisive for Scor,” explained Kett in the note.  

“On the one hand there is the uncertainty surrounding insured US virus deaths, while on the other there is a reinsurer benefitting from a sharp cyclical turn valued at just 6x P/E. Thus, although we maintain our Hold recommendation, we see this early reporting reinsurer as one that will be very impacted by newsflow.”

Kett noted investors will be watching for US mortality claims which the analyst estimated could be as high as Eur1bn – circa 150 percent of normalised earnings.

Scor-YTD-share-price

“In our forecasts, we have penciled in Eur500mn (probably high relative to consensus), though as we stated at the time, there is no reliable data to narrow expectations,” Kett added.

But Kett also estimated below average catastrophe losses within the carrier’s half year results noting that in P&C, aside from the material uncertainty in trade credit, surety and business interruption the catastrophe environment appears to have been “relatively quiet”.

“In terms of forecasts, we expect a 5.0 percent catastrophe loss ratio in 2Q, for 5.2 percent in 1H, comfortably below the 7.0 percent budget,” Kett said.