(AOF) – Moody’s Investors Service has upgraded the financial strength rating of Scor from ” A1 ” to ” Aa3 ” with a stable outlook, has announced the reinsurer. The rating agency justified this decision by the strengthening of the competitive position of the group, its diverse profile, lower exposure than that of its competitors to the branches of reinsurance the more volatile, a high stability of its results and capitalization, high and stable.
Denis Kessler, Chairman and ceo of Scor, said : “This decision underlines the relevance of the strategy and the business model of Scor. The reasons given by Moody’s to explain the increase of rating are fully consistent with the objectives of profitability and solvency of the new strategic plan, Scor, “Vision in Action”, launched on 7 September 2016.”
GLOSSARY
rating Agency
A rating agency is a specialized agency, which assigns notes, in the form of symbols, to classify the credit risk attached to a company and its debt (negotiated in the form of an obligation). Standard & Poor’s, Moody’s and Fitch Ratings are the main credit rating agencies.
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highlights
- top-five global reinsurer, leader in the american market for reinsurance-life with 27 % market share ;
- aggressive Strategy of external growth : after Generali US RE in 2013, which gave a leader to the group, the acquisitions in Spain and the United Kingdom ;
- risk Profile safer : reinsurer on the more geographically diversified, and equitable allocation between reinsurance-life (66 % of premiums) and non-life reinsurance ;
- Ability to maintain profitability during the renewal of contracts at the beginning of 2015 ;
- financial Position is exceptionally strong in the sector (solvency ratio higher than 224 %), with a credit note raised in 2015 ;
- Quality of management is recognized by analysts ;
Ratio dividend payout of 44 %, which is high for the sector.
The weak points of the value
- Sensitivity to natural disasters in developed countries ;
- financial Returns are penalized by low interest rates and an allocation conservative portfolio, Scor ;
- the Uncertainty on the group’s ability to withstand the pressure on prices in the non-life insurance ;
- Sector volatile, difficult to apprehend in stock Exchange to which the global rating of credit has been downgraded to mid-2014 ;
- a Value dear, its highest since 17 years, sanctioned at the slightest disappointment.
How to follow the value of the
- Activity inversely correlated with the economic situation : increase of the transfer of risk from insurers to reinsurers in the phase of economic deterioration, and vice versa ;
- Implementation of the 2013-2016 strategic plan, “Optimal Dynamics” : a solvency ratio of between 185 and 220 % and ROE of 1000 basis points above the 3-month rate, that will be achieved by an annual increase of 7 % of premiums, with a higher presence with major global insurers (45 % in 2012 compared to 65% for competitors), and in emerging countries (29 % expected in 2016), by maintaining the profitability, technical and by the stabilization of the financial result, which is threatened by the rise in interest rates ;
- Entry in new markets : longevity risks, cyber-security, nano-technologies and diversification within the asset management for account of third parties, with€ 1.5 billion targeted for 2016…
- Achievement of the target of€ 12 billion of sales in 2015 ;
- Capital open, the first shareholders are insurers or pension funds (Amundi, Alecta, Generali, Malakoff…) and, more recently, the japanese Sompo (7.8% of the capital and 8.1 % of voting rights).
Finance – Insurance
insurers will have several challenges and adjust their business model quickly. First, in a low interest rate environment, they can no longer rely on the proceeds of their financial investments to increase their results. In addition, there are margins of manoeuvre reduced as a result of new european prudential rules Solvency II. They are, therefore, evolve their business model, and geared more towards products that pay more and require less capital and to the pension-health with its margins attractive. Finally, insurers must make the shift to digital to meet the new uses and behaviours of consumers. The year 2016 will be a strategic year in the transformation of the insurers and the overhaul of their business model.
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