UPDATE: Scor 1st Half Net Drops But Industry Prospect Improves
July 30 2009 - 6:17AM
Dow Jones News
French reinsurer Scor SE (SCR.FR) Thursday reported a 24% drop
in first-half net profit on lower investment gains and high
windstorm claims, but it said that demand for reinsurance cover was
solid and that prices are likely to remain robust in the quarters
ahead.
The Paris-based firm said net profit for the six-month period to
the end of June fell to EUR184 million from EUR242 million a year
earlier. The result beat forecasts of EUR165.2 million as stock and
bond impairments were lower than feared and catastrophe claims were
held in check by cost cuts.
Gross premium income increased 18% to EUR3.25 billion from
EUR2.75 billion, also beating views as Scor was able to benefit
from its strong market position and lift reinsurance contract
prices in markets such as the U.S.
The solid set of figures and the bullish outlook eased analyst
and investor concerns that reinsurers such as Scor, Munich Re
(MUV2.XE) and Swiss Reinsurance Co. (RUKN.VX), which will report
earnings later this month, will be unable to push through price
increases during the recession. Reinsurance companies provide
coverage to traditional insurance firms looking to spread out their
risks to major claims.
At 0930 GMT, Scor were up were up EUR0.79, or 5.1%, to EUR16.38,
extending the stock's 8.5% rise over the past 12 months. The strong
figures also helped the Dow Jones Euro Stoxx 600 Insurance index
gain 1.1%.
Reinsurers can often demand higher prices for reinsurance cover
during times of financial and economic crisis. This is because
insurance firms, which cede the riskiest policies to firms such as
Scor, usually suffer from capital constraints and higher claims
during economic downturns.
"We are confident that prices will remain strong over the next
quarters and into 2010," Chairman and Chief Executive Denis Kessler
said. He added that the market will have more clarity about the
pricing trend during the Monte Carlo meeting in September, when
industry leaders meet to discuss prices.
Scor said that during the July contract renewals it was able to
increase prices for its global property and casualty business by
5.9%, contrary to growing market concerns that prices in the
reinsurance business may even drop.
"Scor has produced another solid set of results," said Tim
Dawson, insurance analyst at brokerage Helvea, adding that the
firm's July renewals were "strong." Likewise, Dawson, who rates the
stock at neutral, said that "the balance sheet remained very
sound."
Shareholders equity, which is important for any insurer as the
capital is needed to back premium growth, increased 6.4% to EUR3.6
billion even as Scor paid out dividends and suffered from
investment write-downs.
The strong balance sheet and the company's high cash buffer of
nearly EUR4 billion, analysts said, will provide Scor with enough
ammunition to pursue growth organically and via acquisitions. Scor
recently bought U.S.-based XL Re Life America Inc., a unit of XL
Capital for about EUR32 million.
CEO Kessler said that the company will seek "pockets of growth"
and pursue "gardening deals" such as the XL Re Life transaction to
bolster its capital position. Scor, after its takeover of
Switzerland-based peer Converium in 2007, belong to the five
largest reinsurers of the world.
Company Web Site:http://www.scor.com
-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47; goran.mijuk@dowjones.com