OREANDA-NEWS. Fitch Ratings has affirmed the ratings of France-based SCOR S.E. (SCOR) and of its subsidiaries. SCOR's Long-term Issuer Default Rating (IDR) and Insurer Financial Strength (IFS) rating have been affirmed at 'A+' with a Positive Outlook. Fitch has simultaneously affirmed SCOR's subordinated debt at 'A-'. A full rating breakdown is available at the end of this commentary.

KEY RATING DRIVERS
The rating affirmation reflects SCOR's improved profitability, as well as strong solvency and financial leverage for its risk profile. SCOR's ratings are also supported by the insurer's significant business and risk diversification. The ratings also take into account the group's consistent and comprehensive strategy, cautious investment policy and solid business position.

SCOR's operating performance continues to improve, as illustrated by a pre-tax operating result of EUR826m in 2014, up from EUR615m in 2013. SCOR's technical profitability also improved over the same period. In non-life, its net combined ratio improved further to a solid 91.5% in 2014 from 93.9% in 2013, with no material reserve release. Life reinsurance profitability remains resilient with a technical margin only slightly down at 7.1%. The fixed charge coverage ratio diminished to 9x in 2014 from 9.8x in 2013.

Fitch expects SCOR to continue to adjust its policy terms and conditions to support profitability. Nevertheless, profitability will remain inherently volatile, mostly due to its exposure to natural catastrophes. In addition, operating performance remains constrained by lower investment income, reflecting the impact of a very low interest rate environment on the group's conservative investment policy.

SCOR has maintained healthy capital adequacy over the past three years, supported by disciplined underwriting and a cautious investment policy. Fitch expects solvency to remain strong. Nevertheless, although the cost of SCOR's acquisitions has usually been reasonable, it has contributed to a sizeable share of life intangible assets (deferred acquisition costs and value of business acquired) on the group's balance sheet. Yet, the sum is manageable as SCOR has other sources of capital, which themselves are substantial, including subordinated debt and value-in-force. The total financing and commitments ratio (TFC), a comprehensive measure of debt-related leverage including essentially all financing activities, is higher than average at 0.9x (FY2013).

SCOR's financial leverage ratio deteriorated slightly to an estimated 24% at end-2014 from 22% at end-2013, largely due to subordinated debt issued in anticipation of upcoming call dates in 2016. Fitch does not expect financial leverage to deteriorate further in the near future.

SCOR has successfully expanded its business position through external growth and swift integration of acquired operations. As a consequence, its business position and diversification have significantly improved over the past five years, notably in life reinsurance.

RATING SENSITIVITIES
A rating upgrade could be triggered by a sustained track record of profitability, demonstrated by a combined ratio and fixed charge coverage ratio consistent with levels reported at end-2013. Alternatively, an upgrade could result from maintaining a final Prism Factor-Based Model score consistent with a 'AA' category rating, or from the TFC ratio falling below 0.8x.


The rating actions are as follows:

SCOR S.E.:
Long-term IDR: affirmed at 'A+'; Outlook Positive
IFS rating: affirmed at 'A+'; Outlook Positive
Senior unsecured debt: affirmed at 'A+'
Junior subordinated debt: affirmed at 'A-'

SCOR Switzerland AG
Long-term IDR: affirmed at 'A+'; Outlook Positive
IFS rating: affirmed at 'A+'; Outlook Positive

SCOR Holding (Switzerland) AG
Long-term IDR: affirmed at 'A+'; Outlook Positive

The following SCOR entities' IFS ratings have been affirmed at 'A+' with Positive Outlook:

SCOR Global P&C S.E.
SCOR Global Life S.E.
SCOR Canada Reinsurance Co
SCOR UK Co Ltd
SCOR Reinsurance Co (US)
General Security Indemnity Co of Arizona
SCOR Reinsurance Co Asia Ltd
SCOR Reinsurance Asia Pacific Pte Ltd
SCOR Global Life Americas Re Insurance Co
SCOR Insurance (UK) Ltd