Scor Financial Update

Investing.com — Scor (EPA:SCOR)'s shares rose following its third-quarter results, driven by a strong Solvency II ratio of 203%, exceeding market and analyst expectations.

At 5:59 am (10:59 GMT), Scor was trading 9.5% higher at €22.42.

The improved S2 ratio, which measures capital adequacy, surpassed the consensus estimate of 191%. This robust capital position appears sufficient to support Scor's year-end dividend, albeit achieved through significant cost-management measures. Notably, a three-year stop-loss contract for property, casualty, life, and health insurance is priced at a "low double-digit million" under IFRS 17 earnings, enhancing the S2 ratio by adding 8 percentage points through lowered Solvency Capital Requirement (SCR).

However, the company reported a net loss of €117 million, missing expectations for a €116 million profit. This loss primarily stemmed from unfavorable long-term assumption revisions and true-up of certain arbitration positions, which reduced the S2 ratio by 4 percentage points. Ongoing arbitration impacts, likely from a settlement with Covéa, continue to affect Scor's financial positioning.

Interest rate changes had a minor impact, lowering the S2 ratio by 2 percentage points but still demonstrating unexpected resilience in Scor's balance sheet.

Regarding operational performance, Scor's P&C segment maintained a steady combined ratio of 88.3%, aligning with expectations despite slightly elevated natural catastrophe losses. However, its insurance revenue and service results fell short by 9.4% and 14.1%, respectively. In contrast, the life and health segment faced significant challenges with a €210 million service result loss, well below the €64 million consensus estimate.

Conversely, Scor's new business contractual service margin exceeded expectations by 11.5%, and the return on invested assets reached 4%, surpassing projections by 0.5 percentage points.

Analysts from Barclays and Jefferies noted that Scor's improved S2 ratio is a positive development for capital stability, particularly for maintaining dividend viability. Nonetheless, Scor's profitability remains under pressure from recent operational and arbitration-related costs, suggesting that the company's growth outlook may depend on the effectiveness of its risk-ceding strategies and cost control moving forward.