Fitch Ratings has affirmed SCOR’s Long-term Issuer Default Rating (IDR) and Insurer Financial Strength (IFS) ratings at ‘A’+. Fitch has simultaneously affirmed SCOR’s junior subordinated debt at ‘A-‘. The Outlook on the IDR and IFS is Stable. A full list of rating actions is at the end of this comment.
KEY RATING DRIVERS
The ratings affirmation follows the announcement by SCOR of its acquisition of Generali U.S., a sizeable life reinsurer operating in the United States, for a cash consideration of USD 750m. Fitch views the transaction as consistent from a strategic standpoint as SCOR is already a leading player in this market and will further strengthen its business position. Execution risk is mitigated by the strong integration track record demonstrated by SCOR over recent years.
The transaction is expected to be funded by internal resources as well as by subordinated debt and short-term bridge financing. Fitch anticipates the group’s capital adequacy will be unaffected while the financial leverage ratio is expected to remain in line with the current rating.
SCOR’s ratings continue to reflect the group’s strong solvency and average debt leverage in relation to its risk profile. SCOR’s ratings are also supported by significant business and risk diversification. The ratings also take into account the group’s consistent strategy, solid business position, and somewhat volatile profitability.
RATING SENSITIVITIES
Although unlikely in the near future, a rating upgrade could be triggered by a material and sustainable recovery of profitability (combined ratio sustainably below 100% and life operating margin sustainably above 6.5%), translating into significant capital accumulation or debt redemption. Conversely, rating triggers that could result in a revision of the Outlook, or a downgrade, include deterioration in Fitch’s assessment of capital adequacy or profitability (combined ratio sustainably above 100% or life operating margin sustainably below 6.5%).
