SCOR launches its new strategic plan, “Vision in Action”
At its annual Investor Day in Paris today, SCOR presents its new three-year strategic plan, “Vision in Action” covering the period mid-2016 to mid-2019.
With the success of “Optimal Dynamics”, SCOR confirms its capacity to combine growth, profitability and solvency, with ambition and determination
SCOR’s Tier 1 position gives it a clear advantage in an attractive industry
- The risk universe, which is the raw material of reinsurance, is rapidly expanding. This is due not just to traditional risks, which are thriving in the midst of the general economic growth, globalisation, population growth and the concentration of populations in the most exposed areas in the world, but also to the emergence and development of risks linked to new technology and the general reconfiguration of the world as a whole;
- The demand for insurance and reinsurance cover is itself expanding and aversion to risk is increasing as nations become wealthier and governments are pushing insurance companies to seek support from the reinsurance industry;
- There is a major protection gap due to the lower prevalence of insurance solutions in most emerging markets – as well as in more mature and developed markets -, and closing this gap will support demand for insurance and reinsurance;
- The reinsurance industry is less exposed to technological “contestability” than other industries. The cat bond phenomenon is largely fuelled by reinsurance companies and enlarges the overall market capacity. Furthermore, the reinsurance industry will benefit from the current technological and financial revolution, which includes alternative capital, connected objects, big data and automation;
- Insurers and reinsurers will benefit fully from the normalization of the current exceptional economic and financial conditions, as well as from the inversion of the P&C pricing cycle;
- The potential for innovation in the reinsurance industry remains strong and will be enhanced by new needs from insurers, changing regulation, better understanding of risk correlation, and better understanding by insurers of their own portfolios, etc.;
- Finally, the reinsurance industry, and more particularly the diversified global reinsurers, have proved their very strong resilience to the most extreme events over the long term, in terms of both economic and loss event shocks.
With “Vision in Action”, SCOR will continue to focus on its two equally weighted strategic targets: profitability and solvency
- Build on continuity and consistency: SCOR’s strategy implemented in the previous plans has proven to be relevant. The Group’s four historical cornerstones (strong franchise, high diversification, robust capital shield and controlled risk appetite) are still fundamental in the current environment. The Group, whose focus will remain on the reinsurance business, intends to pursue its diversified strategy, which combines Life and P&C business;
- Expand and deepen the franchise: over the 2016-2019 period, SCOR plans to grow organically and profitably, leveraging on existing and new platforms. Gross written premiums are expected to grow organically between approximately 4% and 7% annually on average over the plan;
- Normalize the asset management policy as market conditions allow over the plan by aligning it to the upper mid-level risk appetite of the Group, reducing the very high level of prudence that currently characterises the investment portfolio.
- A high return on equity at or above 800 basis points over the 5-year risk-free rate over the cycle4;
- An optimal solvency ratio in the 185-220% range (percentage of SCR)5.
A strategy based on technical profitability, operational excellence and optimized capital management
- The P&C division, SCOR Global P&C, is well positioned to pursue sustainable annual growth in the 3% to 8% range (of gross written premiums) over the plan by: i) further developing the US franchise towards clear Tier 1 reinsurer status, while consolidating its position in international markets, ii) building the Channel Syndicate to sustained profitability, iii) transitioning SCOR Business Solutions (SBS) towards a customer-centric model and expanding the sectors and products offered to large corporations, iv) and developing the MGA(6) platform to promote new business channels using the P&C division’s infrastructure. SCOR Global P&C anticipates a net combined ratio of 95-96% over the plan.
- The Life division, SCOR Global Life, pursues the strengthening of its market position, building on its leadership position in the US market, enhancing its strong EMEA position and expanding in fast-growing Asia-Pacific markets. SCOR Global Life will continue to manage and optimise its in-force book, expand longevity transactions and enhance its Global Distribution Solutions capabilities. Meanwhile, the Life division will develop in China, Japan and South East Asia. SCOR Global Life anticipates a technical margin of around 6.8% to 7.0% p.a., while anticipating annual premium growth of between 5% and 6% over the plan.
- The Asset Management division, SCOR Global Investments, will normalize its investment policy, by reducing liquidity to the target level of 5%, by closing the duration gap between assets and liabilities by the end of the “Vision in Action” plan and by benefitting from additional degrees of flexibility in its asset allocation. The Group expects an average annualised return on invested assets in the range of 2.5% to 3.2% over the plan.
1 Three-month risk-free rates
2 Solvency Capital Requirements
3 Standard & Poor’s and Fitch Ratings
4 Based on a 5-year rolling average of 5-year risk-free rates
5 This is the ratio of Eligible Own Funds over the Solvency Capital Requirement (SCR)
6 Managing General Agent
7 Asset Liability Management
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