Scor shares rise on strong S2 ratio
Investing.com -- Scor (EPA:SCOR )'s shares rose following its third-quarter, boosted primarily by a strong Solvency II ratio of 203% that surpassed both market expectations and analysts' projections.
At 5:59 am (10:59 GMT), Scor was trading 9.5% higher at €22.42.
Scor's improved S2 ratio, which measures capital adequacy, exceeded the 191% consensus estimate.
This fortified capital position appears sufficient to support Scor's year-end dividend, though it was achieved through a significant cost-management measure—a three-year stop-loss contract that covers both property and casualty and life and health insurance.
The contract is priced at a "low double-digit million" amount under IFRS 17 earnings, contributing an additional 8 percentage points to the S2 ratio by lowering Scor's Solvency Capital Requirement (SCR) as a result of ceding risk.
However, the company reported a net loss of €117 million, which was below expectations of a €116 million profit.
The loss was attributed largely to unfavorable revisions in long-term assumptions and the true-up of certain arbitration positions, which reduced the S2 ratio by 4 percentage points.
These arbitration impacts, likely related to a settlement with Covéa, represent an ongoing factor affecting Scor's financial positioning.
Moreover, while interest rate shifts had only a minor impact, reducing the S2 ratio by just 2 percentage points, this figure was less than anticipated, indicating some unexpected resilience in Scor's balance sheet amid rate fluctuations.
In terms of operational performance, Scor's P&C segment delivered a steady combined ratio of 88.3%, aligning with expectations, despite slightly elevated natural catastrophe losses. However, the segment's insurance revenue and service results fell short of consensus by 9.4% and 14.1%, respectively.
On the other hand, the life and health segment faced considerable challenges, posting a €210 million service result loss, falling significantly below consensus estimates of €64 million.
Offsetting this somewhat, Scor's new business contractual service margin exceeded expectations by 11.5%, and the return on invested assets reached 4%, which was 0.5 percentage points above projections.
Analysts from Barclays (LON:BARC ) and Jefferies said that Scor's improved S2 ratio is a positive development for capital stability, particularly in maintaining dividend viability.
Nevertheless, Scor's profitability continues to be pressured by the recent operational and arbitration-related costs, suggesting that the company's growth outlook may hinge on the effectiveness of its risk-ceeding strategies and cost control going forward.
Source: Investing.com
