Scor shares rise as investors welcome new CEO Léger’s three-year strategy
Scor has targeted a P&C net combined ratio of below 87 percent over the period from 2024-2026 amid the “best market conditions over the last two decades”, according to CEO Thierry Léger.
The reinsurer’s new goals, and its expectation that the hard market will continue, were revealed in its strategic plan for 2024-2026, dubbed Forward 2026.
Scor’s P&C targets also include a P&C insurance revenue CAGR of 4-6 percent from 2023-2026 while maintaining its nat cat ratio at 10 percent of net insurance revenue.
Shares in Paris-headquartered Scor rose 2.4 percent in early trading, changing hands at €28.98 apiece as investors welcomed the carrier’s growth plans.
Scor’s shares have risen 33 percent in the year to date with the reinsurer trading at 1.12x book value, according to data from S&P Capital IQ.
KBW analyst Darius Satkauskas said the CAGR target was “broadly in line with consensus”. However, he added that consensus suggested the sub-87 percent combined ratio target would only be achieved in 2026.
The group’s share price was up around 2.7 percent in early trading as investors responded positively to the new goals.
Scor explained that the continuation of the hard market should enable it to grow in selected attractive lines, while building a balanced and resilient portfolio.
The reinsurer noted two equally weighted objectives, one financial and one solvency-related.
The first is to achieve an economic value growth rate of 9 percent per annum, at constant interest and foreign exchange rates, while its solvency target is to keep its solvency ratio in the 185-220 percent range to help maintain its AA-level of security.
The strategy will also see continued portfolio diversification in its reinsurance business, with plans to grow diversifying lines in specialty reinsurance.
On the investment side, Scor hopes to increase its regular income yield to between 3.4 percent and 3.8 percent by 2026.
These assumptions mean its return on equity is expected to be in excess of 12 percent per annum over 2024-2026.
It also aims to deliver a life and health insurance services result between €500mn ($429mn) and €600mn over 2024-2026, with improved operating cash flows reaching between €200mn and €400mn by 2026.
Léger – who joined Scor earlier this year from Swiss Re – said: “We are benefiting from the best market conditions seen in the last two decades, and we have a very strong franchise: I am confident that Scor will thrive in this environment, growing in attractive segments, delivering on its financial and solvency targets, and creating significant value for its shareholders.”
Shaping reinsurer of tomorrow
Scor noted a number of targets to become future ready, which included a number of ESG-focused targets.
These included to reach net-zero emissions in its operation by 2030, engage with at least 30 percent of its specialty insurance single risk premium on their ESG commitments and transition strategy, and to enhance reinsurance coverage for low-carbon energy by 3.5 by 2030.
The reinsurer is also set to maintain management expenses at their current level between 2023 and 2026, a strategy expected to create cost savings of €150mn by the end of 2026.
Its future-ready strategy will focus on creating value through a more granular approach to both capital allocation and performance, and asset and liability management.
The reinsurer indicated it would look to enhance its use of data through a single platform to improve its modelling and capital allocation strategies.
Scor also introduced a new capital management framework for shareholders, which factors cash dividends and may also include share buybacks and dividends.
KBW’s Satkauskas noted the new framework is a “strong step forward” partly because the group is putting a floor on the regular dividend.
The announcement said calibration of the regular dividend for the financial year 2023 and any potential share buyback or special dividend amount will be announced together with the FY 2023 results in March 2024.
Fabrice Brégier, chairman of Scor, added: “Thierry Léger and his team have built an ambitious strategic plan for Scor for the next three years. This plan defines the best ways and means for the group to consolidate its position as a global reinsurer, taking advantage of its global underwriting platform and technical know-how.”