SCOR SE’s Board of Directors met on October 26, 2021, under the chairmanship of Denis Kessler, to approve the Group’s Q3 2021 financial statements. 

The key highlights are:

Strong earnings capacity in a volatile environment

Overall, SCOR records a net income of EUR 339 million in the first nine months of 2021 and delivers an estimated solvency of 225%⁴.

In the first nine months of 2021, SCOR’s results were heavily impacted by a series of large 
natural catastrophes. The total cost of natural catastrophes stands at EUR 708 million (net of retrocession and before tax), in particular driven by European floods and Hurricane Ida in the third quarter of 2021. Those two events had a total impact of EUR 343 million (net of retrocession and before tax). In the first nine months of 2021, Covid-19 claims continued to be manageable, standing on the Life side at EUR 299 million^{5 6}  (net of retrocession and before tax), of which EUR 241 million (net of retrocession and before tax) comes from the U.S. mortality portfolio, and increasing by EUR 75 million (net of retrocession and before tax) in the third quarter of 2021. On the P&C side, Covid-19 claims have been stable since June 30, 2021 standing at a total of EUR 109 million in the first nine months of 2021 (net of retrocession and before tax). In addition, SCOR benefited from a positive one-off revaluation impact of EUR 64 million related to the IPO of Doma Holdings⁷, demonstrating the Group’s successful investment strategy in new ventures focusing on Insurtech-driven underwriting companies. 

• Gross written premiums of EUR 13,047 million in the first nine months of 2021 are up 10.1% at constant exchange rates compared with the first nine months of 2020 (up 6.2% at current exchange rates).
• SCOR Global P&C gross written premiums are up 16.7% at constant exchange rates compared with the first nine months of 2020 (up 12.1% at current exchange rates), benefiting from a strong market environment both in reinsurance and insurance markets. The net combined ratio for the first nine months stands at 102.7%, including 14.8% of natural catastrophes and 2.3% of Covid-19 related claims.
• SCOR Global Life gross written premiums are up 5.0% at constant exchange rates compared with the first nine months of 2020 (up 1.7% at current exchange rates). Over the period, SCOR Global Life delivers a technical margin of 11.3%, driven by the recent Life in-force transaction.
• SCOR Global Investments delivers a return on invested assets of 2.3%⁸ in the first nine months of 2021.
• The Group cost ratio, which stands at 4.3% of gross written premiums in the first nine months of 2021, is more favorable than the “Quantum Leap” assumption of ~5.0%. 
• The Group net income stands at EUR 339 million in the first nine months of 2021. The annualized return on equity (ROE) stands at 7.3%, 683 bps above the risk-free rate⁹.
• The Group generates high operating cash flows of EUR 2,018 million in the first nine months of 2021 of which EUR 860 million relate to the recent Life in-force transaction. The Group’s total liquidity is very strong, standing at EUR 3.3 billion as of September 30, 2021.
• The Group shareholders’ equity stands at EUR 6,315 million¹⁰ as of September 30, 2021. This results in a book value per share of EUR 34.13, compared to EUR 33.01 as of December 31, 2020.
• The Group financial leverage stands at 28.0% as of September 30, 2021, down 0.5% points compared to December 31, 2020. 
• The Group solvency ratio is estimated at 225%¹¹ on September 30, 2021, above the optimal solvency range of 185% - 220% as defined in the “Quantum Leap” strategic plan.

A EUR 200 million share buy-back program starting October 28, 2021, and finalized at the latest by March 2022

A share buyback is an accretive way to deploy capital and deliver further value to SCOR’s shareholders.

The recent Life retrocession in-force transaction, which closed on the last day of the second quarter, unlocked significant value, generating USD 1 billion in cashflows while increasing the Group’s degrees of freedom for value-accretive capital management. As at the end of Q2 2021, SCOR’s estimated solvency position was extremely strong, as demonstrated by a solvency ratio of 245%, significantly above the upper end of its optimal solvency range of 185%-220%. 
SCOR has assessed the various options to optimally deploy capital, to create long-term value for SCOR’s shareholders and revert to the upper end of the 185-220% optimal solvency range. As presented at the September 8^th Investor Day, SCOR will continue to proactively deploy capital, to:

• Seize profitable growth opportunities in the continuously hardening P&C market, and re-balance its exposure towards P&C business, while shifting its portfolio mix away from Natural Catastrophes business volatility, and leveraging retrocession to protect earnings; 
• Actively pursue diversification of its investment portfolio into value-creation assets to target 10% exposure by the end of 2022, as well as by deploying its excess liquidity into corporate bond (the reinvestment of excess liquidity program is on track, and will be finalized by Q4 2021), and maintaining a largely matched duration as it has over the last few years.

Considering these capital allocation decisions for 2022 to pursue its profitable growth, the Group’s solvency ratio is estimated to be at 225%¹² on September 30, 2021. The proposed revision of the Solvency II Framework presented by the European Commission on September 22, 2021 would further support the solvency of the Group in the mid-term.

In view of this capital position, noting that the U.S. hurricane season is coming to an end and that the regulatory constraints against capital distribution (dividends and share buy-backs) were lifted on October 1, 2021 by the ACPR (Autorité de Contrôle Prudentiel et de Résolution)¹³, SCOR launches a share buy-back program of EUR 200 million that will start on October 28, 2021, and will be fully executed in the market at the latest by the end of March 2022. Execution of the share buy-back will be subject to market conditions. This share buy-back program is expected to impact the Group’s solvency ratio by c. -4 ppts¹⁴, to 225%. SCOR intends to allocate the repurchased shares to cancellation.

SCOR’s dividend policy remains unchanged: SCOR continues to favor dividends as a way to remunerate its shareholders and pursues the attractive dividend policy that it has implemented over the past years. 

The share buy-back will be conducted within the framework approved by the annual general meeting held on June 30, 2021. To carry out the program, SCOR may grant mandates to independent investment services providers. 

SCOR takes proactive actions to improve its operational performance 

SCOR is implementing actions to improve its operational performance: 

• At January renewal, the Group will seize profitable growth opportunities in the continuously hardening P&C market and re-balance its exposure towards P&C business.
• The Group will reduce its exposure to Nat Cat by shifting its portfolio mix and leveraging retrocession to limit earnings volatility.
• SCOR is focusing on technical profitability on each market, each line of business, each client, each contract, in order to remunerate allocated capital under “Quantum Leap” assumptions.
• SCOR increases its risk appetite on the asset side through investment in value creation assets. Liquidity will be reduced from 16% at June 30, 2021, to 9% by year-end 2021.
• SCOR is pursuing capital management actions to optimize its balance sheet.

SCOR is actively preparing the upcoming strategic plan

SCOR delivers on the “Quantum Leap” strategic plan, which runs until the end of 2022, and will present in Spring 2022 the orientations for the new strategic plan to start on January 1, 2023. 

The Group has actively embarked on the preparation of its upcoming strategic plan, which builds on:  

• An exploration to deepen the franchise and create value for shareholders; 
• A detailed analysis of the performance of SCOR’s portfolios to optimize the value of its core business;
• A review of SCOR’s operating model to take full advantage of a nimble and lean organization;
• An analysis of the options available to enhance its financial and capital management.

The Group is nurturing its strong and disciplined underwriting ethos and will focus on Culture & People, Business Leadership, and Financial Performance to build a differentiated value proposition and deliver on its two targets: profitability and solvency.

Denis Kessler, Chairman of SCOR, comments: “Given the recent lift of the regulatory constraints against capital distribution, the Board of Directors has decided to launch a EUR 200 million share buy-back program, considering on the one hand the very strong solvency position of the Group after taking account of the level of capital required by the company to pursue its profitable growth in 2022, and on the other the high net asset value per share, which makes such an operation highly beneficial to SCOR shareholders. Furthermore, the Board has reaffirmed the attractive dividend policy actively pursued by the Group over the past few years.”

Laurent Rousseau, Chief Executive Officer of SCOR, comments: “This is SCOR’s core mission as a Tier 1 reinsurer: to help its clients and partners be more resilient in a highly volatile environment. Thanks to the strict application of our strategic cornerstones, SCOR absorbs shocks and continues to manage growth, improve profitability and reduce earnings volatility. In this context, SCOR deploys its capital proactively to create long term value to its shareholders. The share buy-back program that we are announcing today is a demonstration of the confidence we have in our solvency position and our ability to continue to grow profitably. In the wake of its capital management actions, SCOR retains its robust capital shield in a market environment that remains volatile, and where financial strength is a key differentiator. SCOR is poised to reap the benefits of its strong franchise, and to seize the attractive long-term growth opportunities emerging from the rapidly changing risk environment.”
 

^{1   At constant exchange rates
2  Based on a 5-year rolling average of 5-year risk-free rates (43 bps in the third quarter of 2021)
3  Solvency ratio estimated at 229% before share buy-back and at 225% after share buy-back
4  Solvency ratio estimated at 229% before share buy-back and at 225% after share buy-back  
5  Net of reduced flu claims in the U.S., net of retrocession and before tax, including IBNR
6 Covid-19 claims of EUR 268 million (net of retrocession, before tax) reported for H1 2021 were presented before the impact of the Life in-force transaction. The equivalent figure for Covid-19 claims for H1 2021 net of the Life in-force transaction was EUR 207 million (net of retrocession and before tax), of which EUR 166 million (net of retrocession and before tax) comes from the US in-force portfolio and EUR 41 million (net of retrocession and before tax) from all other markets
7  Doma Holdings, Inc. (formerly known as States Title Holding, Inc.) (“Doma”) completed its business combination with Capitol Investment Corp. V (NYSE: CAP) (“Capitol”) on July 28, 2021. As a result of the IPO, Doma shares (initially classified as AFS equities in SCOR’s Balance Sheet) have been converted into common shares (from preferred shares) leading to their derecognition as the rights to cash flows were substantially modified. The derecognition resulted in a Q3 P&L impact of USD 105 million (EUR 89 million) before tax
8  Return on invested assets excludes the EUR 89 million capital gain realized on the Doma transaction, which is a venture investment not held for investment purposes
9  Based on a 5-year rolling average of 5-year risk-free rates (43 bps in the third quarter of 2021)
10  Excluding the impact of the share buy-back
11  Solvency ratio estimated at 229% before share buy-back and at 225% after share buy-back  
12  Solvency ratio estimated at 229% before share buy-back and at 225% after share buy-back
13  Press release from the ACPR: https://acpr.banque-france.fr/communique-de-presse/lacpr-confirme-la-levee-de-sa-recommandation-sur-les-distributions-dividendes-rachats-daction
14 The volume of monthly acquisitions of SCOR shares will depend on market conditions, within the limits set by the Market Abuse Regulation (EU) No 596/2014 (MAR), as amended, and the resulting delegated legislation. Based on the share price of SCOR as at October 26, 2021, the share buy-back corresponds to a maximum of 8.0 million shares or 4.3% of the capital}