SCOR SE’s Board of Directors met on March 1, 2023, under the chairmanship of Denis Kessler, to approve the Group’s 2022 financial statements.
2022 was the sixth consecutive year marked by a high frequency of natural catastrophes and other weather-related events, including floods in Australia, Hurricane Ian in the U.S., hailstorms in France and one of the worst droughts in Brazilian history. The beginning of the year was also marked by the continuation of the global pandemic as well as the start of the war in Ukraine, the largest military conflict Europe has seen in decades. On the macroeconomic front, strong inflationary pressures in Europe and the United States led central banks to raise interest rates, resulting in a sharp paradigm shift for investors and borrowers. These various developments have had a significant impact on reinsurers' earnings in 2022 but have also resulted in a combination of higher prices and higher investment returns, both of which are expected to strongly support reinsurers’ performance in 2023.
In this challenging environment, SCOR continues to pursue its missions, once again demonstrating its ability to absorb the shocks of all kinds which the Group could be facing. The release of excess reserve margins in SCOR L&H enabled the Group to finance the increase in P&C technical reserves, to anticipate the impact of social and economic inflation. While the Group experienced significant claims from weather events and the Covid-19 pandemic, it remains very well capitalized with a Solvency ratio of 213%. SCOR ends 2022 with an accounting loss of EUR 301 million, which has been significantly reduced by the strong results in the fourth quarter. In Q4 2022, the Group generates a net income of EUR 208 million (equivalent to an annualized RoE of 16.8%), with each of the three business units delivering a positive result.
The Q4 2022 results, along with the January 1, 2023 renewal results (published by SCOR on February 7, 2023), show the tailwinds from which the Group is now benefiting:
- In P&C reinsurance, the market continues to harden and SCOR records a 9% rate increase at the January 1, 2023 renewals, which should lead to a significant improvement in expected profitability.
- In L&H reinsurance, the combination of a strong underlying performance and a now reduced number of Covid claims enables SCOR to generate a technical margin of 13.3% over the quarter, without releasing excess technical reserves.
- The regular income yield on SCOR’s investment portfolio continues to increase, driven by the rapid reinvestment of SCOR’s portfolio, which benefits from a short duration and high reinvestment rates (4.9% at December 31, 2022).
The 2022 results reflect both the highly volatile operating environment and the Group’s strong performance in the fourth quarter.
- Gross written premiums stand at EUR 19,732 million in 2022, up 4.9% at constant exchange rates compared with 2021 (up 12.1% at current exchange rates).
- SCOR P&C (Property and Casualty) gross written premiums are up 13.5% at constant exchange rates compared with 2021 (up 21.7% at current exchange rates). The net combined ratio stands at 113.2%, marked by several exceptional developments. It includes a Nat Cat ratio of 12.4%, claims relating to the impact of the drought in Brazil accounting for 2.6%, and the reserve increase announced in Q3 2022 to anticipate the impact of the social and economic inflation accounting for 6.2%.
- SCOR L&H (Life and Health) gross written premiums decline by 2.7% at constant exchange rates compared with 2021 (up 3.7% at current exchange rates). In 2022, SCOR L&H delivers a technical margin of 14.5%, benefiting from a strong underlying performance, active in-force management and the release of excess reserve margins (corresponding to EUR 460 million above an 8.3% normalized level of technical margin in the third quarter of 2022).
- SCOR Investments delivers a return on invested assets of 2.1% for 20223 with a regular income yield at 2.4% (3.1%4 in Q4 2022).
- The Group cost ratio stands at 4.5% of gross written premiums in 2022.
- The Group net loss stands at EUR -301 million for 2022. It reflects the combined impact of Nat Cat claims and drought claims in Brazil (EUR -204 million) and the non-recognition of DTAs (EUR -164 million total annual amount), while the impact of the P&C reserve increase is broadly offset by the release of L&H excess margins in Q3 2022. This net loss is reduced compared to Q3 2022 thanks to the Group’s strong performance and net income of EUR 208 million in Q4 2022.
- The Group generates operating cash flows of EUR 500 million in 2022, driven by a positive operating cash flow of EUR 1,232 million from SCOR P&C, while operating cash flow from SCOR L&H is negative at EUR -732 million. In Q4 2022, both P&C and L&H generated positive operating cash flows.
- The Group shareholders’ equity stands at EUR 5,133 million as of December 31, 2022, down from EUR 6,402 million at the end of 2021, resulting in a book value per share of EUR 28.48 compared to EUR 35.26 as of December 31, 2021. The largest driver for this change is the revaluation reserves (assets measured at fair value through OCI) which vary by EUR -955 million over 2022. The current unrealized losses on the fixed income portfolio (EUR 1.4 billion as of December 31, 2022) will not materialize and will quickly and significantly decrease as the securities on the portfolio reach maturity (expected recapture of EUR 0.9 billion in shareholders’ equity over the next three years).
- The Group financial leverage stands at 32.4% as of December 31, 2022, up 4.6 points compared to December 31, 2021 (27.8%), due to the decrease in shareholders’ equity. Adjusted for the negative impact of the revaluation reserves (assets measured at fair value through OCI) on the fixed income portfolio, the leverage ratio stands at 28.6% as of December 31, 2022.
- The Group solvency ratio is estimated at 213%5 on December 31, 2022, in the upper part of the optimal solvency range of 185% - 220% defined in the last strategic plan. This solid capital base notably takes into account an impact of -26 points related to (i) the increase in P&C reserves in Q3 2022, and (ii) further resilience built within L&H assumptions in advance of IFRS17.
Attractive dividend policy pursued, with a dividend of EUR 1.40 per share proposed for 2022
The 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.
Despite the significant accounting loss recorded in 2022, the Group’s capital position remains solid, its solvency ratio is in the upper part of the optimal range and SCOR is confident in its prospects. SCOR therefore proposes a dividend of EUR 1.40 per share for the fiscal year 2022. This dividend will be submitted for shareholders’ approval at the 2023 Annual General Meeting, to be held on May 25, 2023. The Board proposes to set the ex-dividend date at May 30, 2023, and the payment date at June 1, 2023.
At the end of 2022, the Group’s solvency ratio is 219%. After taking the dividend into account, it stands at 213%, in the upper part of the optimal solvency range of 185% - 220%.
Acceleration of the one-year plan and preparation of the next Strategic Plan
As of Q1 2023, the Group will publish its financial results under the new IFRS 17 accounting standard. This transition will allow SCOR to disclose the full value of its portfolio through the introduction of the Contractual Service Margin (CSM), which reflects the present value of expected future profits based on strict rules. Together with the Group’s shareholders’ equity, the CSM is one of the two components of the Group’s Economic Value. At January 1, 2022, this Economic Value was at a point estimate of EUR 10.8 billion, within a range of EUR 10.5-11.1 billion6 (of which EUR 6.7-7.0 billion for shareholders’ equity and EUR 5.1-5.4 billion for CSM gross of tax).
During a session dedicated to IFRS 17 on April 12, 2023, SCOR will publish its objectives and performance assumptions for 2023 under IFRS 17, along with an update of the Economic Value (and its main components) as at January 1, 2023.
SCOR’s new Chief Executive Officer will take up his post on May 1, 2023, and the Board of Directors has asked him to develop a strategic plan under IFRS 17 that will enable the Group to take full advantage of the favorable market conditions. The outline of this strategic plan will be presented at the Annual General Meeting on May 25, 2023. SCOR’s Investor Day will be held on September 7, 2023, at which time details of the Group’s strategic direction, financial performance assumptions and new targets will be presented. The Group will continue to leverage its global underwriting platform and know-how to seize market opportunities, building on its status as a Tier 1 reinsurer, a recognized leading market position, a high-quality franchise, a very strong financial profile and recognized technical expertise.
Denis Kessler, Chairman of SCOR, comments: “The Group’s annual results are very disappointing despite a solid performance in the fourth quarter. A sustainable return to profitability is imperative. A new, highly experienced Chief Executive Officer, Mr Thierry Léger, will join the Group on May 1, 2023. He will present the broad outlines of his strategic plan at the Annual General Meeting on May 25, 2023, and will implement it without delay and with great determination after presenting it to the investors in September 2023. This will enable the Group to take full advantage of its global underwriting platform and technical expertise to seize the opportunities available in the L&H and P&C reinsurance markets, building on its status as a Tier 1 reinsurer. The Board of Directors is confident in the Group's ability to return to growth, restore profitability, and reinforce its solvency. Consequently, it proposes a dividend of EUR 1.40 per share for 2022, which will be submitted for shareholders’ approval at the Annual General Meeting."
François de Varenne, interim Chief Executive Officer of SCOR, comments: “2022 has been a difficult year for SCOR, even if the fourth quarter was better than the previous quarters. With the normalization of the pandemic, the L&H reinsurance business performed very well in 2022. The release of L&H excess reserve margins enabled the Group to finance the increase in P&C technical reserves. Along with P&C reinsurance, L&H is generating significant diversification benefits, and IFRS 17 will reveal the full value of its portfolio. The P&C renewals at January 1, 2023, confirm the continued hardening of the market. Reinvestment rates are expected to remain high, increasing the financial contribution of the investment portfolio. The teams are fully mobilized to accelerate the execution of the one-year plan to restore the Group's profitability and to ensure the transition to the new IFRS 17 standard. We are ready to support the new CEO in the preparation and execution of a new, ambitious strategic plan."
1 At constant exchange rates.
2 Solvency ratio estimated after taking into account the proposed dividend of EUR 1.40 per share for the fiscal year 2022
3 In 2022, fair value through income on invested assets excludes EUR (22) million related to the option on own shares granted to SCOR. The 2022 RoIA at 2.1% is calculated based on IFRS 9 and includes the impact of expected credit losses (ECL) and change in fair value of invested assets measured at fair value through profit and loss. Excluding those impacts (which would not have been recorded under IAS39), the RoIA would have been at 2.2%.
4 Regular income yield and RoIA include one-off positive impacts of 20bps mainly resulting from a change in scope in Q4 2022. Excluding the one-off impacts, the Q4 2022 QTD regular income yield and the RoIA stand at 2.9% and 2.7% respectively.
5 Solvency ratio estimated after taking into account the proposed dividend of EUR 1.40 per share for the fiscal year 2022.
6 Net of tax. A notional tax rate of 25% was applied to the CSM to calculate Economic Value.