(Boursier.com) — For the year 2023, the group SCOR has two equally important objectives:
– A financial objective: a growth rate of its Economic Value measured according to the IFRS 17 accounting framework, between December 31, 2022 and December 31, 2023, of 700 basis points above the risk-free rate based on economic rate assumptions. constant interest and exchange rates;
– A solvency objective: a solvency ratio in the optimal range of 185% to 220%. In 2023, the solvency ratio should remain at the top of the optimal range.
These two objectives are based on a set of financial assumptions relating to the 2023 financial year.
SCOR will present its results for the first quarter of 2023 in accordance with IFRS 17 on May 12, 2023.
The main lines of the new strategic plan in line with the new IFRS 17 accounting framework will be presented at the General Meeting of May 25, 2023. The strategic plan itself will be presented during SCOR’s Investor Day to be held on May 7, 2023. September 2023.
Transition to the new IFRS 17 accounting framework
From the first quarter of 2023, the group will publish its financial results according to the new IFRS 17 accounting standard. This transition allows SCOR in particular to reveal the full value of its risk portfolio, in particular in life reinsurance, thanks to the introduction of the contractual service margin (“Contractual Service Margin” or CSM) which reflects the present value of expected future profits based on strict and audited rules.
Along with shareholders’ equity (“Equity”), the CSM is one of the two components of the Group’s Economic Value measured according to the IFRS 17 accounting framework.
Growth in Economic Value reflects not only current year earnings, but also the net value creation associated with the year’s underwriting activity, via the generation of CSM on new business.
SCOR will publish each quarter the evolution of its Economic Value as well as its breakdown into equity and CSM.
Economic Value as of December 31, 2022
The Economic Value of the Group as of December 31, 2022 measured according to IFRS 17 accounting standards is estimated at EUR 8.7 billion. This represents an Economic Value per share of approximately 48 euros…
The Economic Value of the Group as of December 31, 2022 breaks down into:
EUR 4.6 billion CSM, i.e. 6.1 billion CSM before tax, itself made up of:
EUR 5.4 billion of CSM L&H before tax,
EUR 0.7 billion of CSM P&C before tax.
EUR 4.1 billion in equity.
The increase in CSM in 2022 reflects the growth of the risk portfolio as well as the good level of technical profitability expected for new business written during the year.
The decrease in equity is greater under IFRS 17 than under IFRS 4, in particular due to the difference between the net technical result under IFRS 4 and the result of insurance activities under IFRS 17. Indeed, under IFRS 17, the ongoing business portfolio management initiatives in life reinsurance are recognized over time with no significant immediate impact on the income statement.
Furthermore, the release of excess reserves in life reinsurance in the third quarter of 2022 had no impact under IFRS 17 and IFRS 17 equity also reflects the resilience added upstream of the transition. The level of equity also takes into account a greater economic impact under IFRS 17.
As of December 31, 2022, the risk adjustment or “Risk Adjustment” (amount recorded as a liability to take into account the uncertainty relating to the amounts and timing of cash flows related to non-financial risks during the execution of (re)insurance contracts) amounted to 2.4 billion including 2.1 billion for the L&H portfolio and 0.3 billion for the P&C portfolio.
A supportive environment
SCOR focuses on the technical profitability and the return/risk profile of its risk portfolio, by focusing on the optimization of (i) the capital allocated by line of business and by client, and (ii) the composition of the portfolio, both in terms of risk diversification and the resilience of technical results.
The Group seeks to take full advantage of the buoyant winds enjoyed by the reinsurance sector:
The positive phase of the cycle in damage and liability reinsurance;
The normalization of claims related to the Covid-19 pandemic in life reinsurance;
High reinvestment rates in assets.
The Group pursues the objective of offering an AA level of security to its customers.
The Group is also continuing to implement transformation and simplification measures.
Objectives and financial assumptions for the year 2023 according to the IFRS 17 accounting framework
Following the transition to IFRS 17, SCOR has set itself two ambitious objectives for 2023, which are of equal importance:
A financial objective: a growth rate of its Economic Value measured according to the IFRS 17 accounting framework, between December 31, 2022 and December 31, 2023, of 700 basis points above the risk-free rate based on economic rate assumptions constant interest and exchange rates;
A solvency objective: a solvency ratio in the optimal range of 185% to 220%. In 2023, the solvency ratio should remain at the top of the optimal range.
These two objectives are based on a set of financial assumptions relating to the 2023 financial year, for the Group and each of its three driving forces.
These assumptions are:
Group: growth in gross insurance revenue of between 1% and 3%.
(Re)Insurance for Damages and Liability (“P&C”):
Growth in gross insurance revenues between 0% and 2% (gross insurance revenues from the P&C activity amounted to 7.4 billion in 2022),
Combined ratio of 87%, of which 10% related to the budgeted cost of natural disasters,
Expected CSM generation of 750 million by new business.
Life Reinsurance (“L&H”):
Growth in gross insurance revenues of between 2% and 4% (gross insurance revenues for the L&H activity amounted to 8.5 billion in 2022),
Result from insurance activities of 450 million,
Expected CSM generation of 450 million by new business.
Investments: current yield within a range of 2.8% to 3.2%.
Group management expense ratio within the range of 7.1% to 7.3% of gross insurance revenue.
Annualized return on equity (“Return on Equity” or ROE) greater than 1,100 basis points above the risk-free rate18.
Dividend policy for the year 2023
As a listed company, SCOR pursues an attractive and consistent shareholder remuneration policy, which favors cash dividends but may also include special dividends or share buybacks.
SCOR aims to offer a resilient, predictable and predictable dividend.
SCOR aims, through this dividend, to distribute to its shareholders a significant portion of the Economic Value created during the cycle. To this end, SCOR follows a 3-step procedure:
Ensure that the Group’s solvency ratio, taking into account expected future growth, is within the optimal range;
Consider the Economic Value created over the past year and analyze its components;
Set the amount of the cash dividend accordingly.
Preparation of the new strategic plan
Thierry Léger, the new CEO of SCOR, will take office on May 1, 2023. His priority will be the development of a strategic plan according to the IFRS 17 accounting framework that will allow the group to make the most of favorable market conditions.
The outline of this strategic plan will be presented at the General Meeting of May 25, 2023. SCOR’s Investor Day will be held on September 7, 2023: the details of the strategic orientations, the Group’s new objectives and the related assumptions will be presented there. presented.
Denis Kessler, Chairman of SCOR, said: “The transition to the new IFRS 17 accounting standard constitutes a real quantum leap for the reinsurance industry in general and for SCOR in particular. This new reference framework reflects more precisely and more faithfully the Economic Value of the Group’s risk portfolio, particularly in life reinsurance The Economic Value of SCOR at December 31, 2022, amounting to EUR 8.7 billion, attests to the relevance of the strategic choices made over the years These choices were guided in particular by the conviction that life reinsurance is an activity that generates strong value. This Economic Value is now fully recognized in the Group’s accounts.”
François de Varenne, interim CEO of SCOR, said: “The transition to IFRS 17 will allow SCOR to reveal the full value of its portfolio, in particular in L&H reinsurance, thanks to the introduction of the CSM (Contractual Service Margin”) which, combined with equity, constitutes the Group’s Economic Value. This is an opportunity: our systems have been updated and our analytical framework has been modified. The teams are mobilized, with ambitious objectives of creating value and solvency for 2023. We will publish our results on May 12, 2023 and we are ready to support the new CEO in the preparation of an ambitious new strategic plan according to the new IFRS 17 standard.”