Scor’s strategic plan may lead to positive rating action: Fitch

Scor’s recently unveiled strategic plan under new CEO Thierry Léger may see the Paris-based reinsurer return to profitability levels consistent with higher-rated peers in the medium term, according to Fitch Ratings.

In a non-rating action commentary, Fitch described the targets under the three-year plan as “reasonably ambitious but achievable” as the firm looks to build a more balanced and resilient earnings profile.

Fitch noted that the strategy does not have immediate rating implications, with the 2024-2026 guidance consistent with its prior expectations for a stable credit profile over the next 12 to 24 months.

However, the rating agency added that over the medium term the plan could return Scor to profitability levels consistent with higher-rated peers, as it consolidates its “very strong” business profile and capitalisation.

In addition, successful implementation of the plan – leading to stronger, less volatile earnings with maintained strong capitalisation – may lead to a positive rating action.

Fitch also warned that failure to improve performance and a deterioration in capitalisation and leverage would put pressure on Scor’s existing insurer financial strength rating of A+ with a stable outlook.

Targets under the plan include a P&C net combined ratio of below 87 percent over the period from 2024-2026, as well as P&C insurance revenue compound annual growth rate of 4-6 percent while maintaining its nat cat ratio at 10 percent of net insurance revenue.

“Fitch takes a positive view on planned management actions to build less volatile, more resilient earnings while building conservatism in reserves through an enhanced reserving framework,” said the commentary.

“Overall, we view the target technical performance objectives as achievable and supportive of our assessment of a strong performance.”

Fitch added: “The combination of management actions, reinsurance rates increases and higher reinvestment rates started to earn through this year. This supports our expectations for a return to a profitability level commensurate with the rating in 2023.”