SCOR’s CEO change and weak profitability lead to Moody’s IFSR downgrade
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Moody's Investors has downgraded the insurance financial strength rating of French reinsurer SCOR and its key operating entities, to A1 from Aa3 following weakened profitability and a recent change of its chief executive officer. However, it has improved the company’s outlook to stable from negative.
Based on Moody’s definition, an IFSR reflects an insurance company’s intrinsic financial strength relative to all other rated insurance companies globally. Moody’s assigns the ratings from a 13-point scale ranging from A to E (including + and - rating qualifiers).
The ratings agency said the downgrade “reflects the recent weakening of the group's profitability and Moody's expectation that the group's senior management will likely be faced with a high level of scrutiny from both external stakeholders, namely clients and investors, and internal stakeholders, which will increase execution risk in implementing a new strategic plan”.
Last month the French reinsurer announced Thierry Léger would join as CEO in May to replace Laurent Rousseau, stressing the need to develop and implement a new comprehensive strategic plan, which Moody’s said has been a key strength of the group in the past.
“In Moody's view, the turnover in SCOR's CEO role highlights challenges in the implementation of the group's succession plan,” it said.
On profitability, Moody’s noted SCOR’s weakening in performance in the first six months of the year, which continued in the third quarter after the group posted a net loss of €509m (£455m) for the first nine months of the year amid heavy natural catastrophe claims.
The group's solvency remained on “very strong” levels, at a ratio of 217%, but Moody's notes that positive market movements strengthened the ratio by 43 percentage points over the first nine months.
“Whereas Moody's notes positively that the board took proactive action, Moody's expects that it will take time for the senior management to rebuild the group's track record,” the ratings provider said.
The agency noted incoming CEO Léger is “highly experienced in the sector”, with expertise in both life and property and casualty reinsurance, which positions him well to run the group going forward.
On SCOR’s stable outlook, Moody’s said it reflects its expectation that SCOR will maintain its strong franchise both in the global P&C and the life reinsurance sectors. In addition, Moody’s expects that the reinsurer will be able to gradually improve its profitability, both in terms of earnings levels and volatility, and maintain capital adequacy within its target range.
SCOR has been approached for comment.
SCOR and its subsidiaries are assessed by four main ratings agencies: Moody’s Investors, S&P, Fitch and AM Best. Ratings can be found on SCOR’s website .
Will other ratings agencies follow Moody’s and change SCOR’s rating assessment?
