Scor Se · EURONEXT:SCR
Scor — BOAML conference 2019
27 slides from Scor's conference presentation, Sep 25, 2019
Slide 1: SCOR delivers in a world of extremes
SCOR delivers in a world of extremes Denis Kessler Chairman and CEO BOAML conference September 25, 2019 1
Slide 2: Disclaimer
Disclaimer General: Numbers presented throughout this report may not add up precisely to the totals in the tables and text. Percentages and percent changes are calculated on complete figures (including decimals); therefore the presentation might contain immaterial differences in sums and percentages
Slide 3: Every industry and every economic sector is subject to different kinds of forces
Every industry and every economic sector is subject to different kinds of positive, negative and disruptive forces Trends Cycles (linear, (regular, hyperbolic, dissipative or parabolic, etc.) explosive) Economic sector ? Shocks Contestability (single or (rupture / discontinuity) multiple) 3
Slide 4: The reinsurance industry is structurally exposed to extreme events and shocks
The reinsurance industry has one specific feature that it shares with no other sector: that of being structurally exposed to extreme events and shocks Large risks and catastrophes make up the raw material of reinsurance They result in shocks with varying origins, sizes and consequences GLOBAL PA
Slide 5: Insurance and reinsurance operate in different risk spaces
Insurance and reinsurance operate in different “risk spaces” Probability distribution The “insurance Gaussian world” The “reinsurance world” → Belly of the risk distribution → Tail of the risk distribution → Statistical nature → Probabilistic nature → Abundant and granular data → Limited data → High
Slide 6: Cornerstones for creating superior long-term value from stochastic raw material
For a reinsurer, creating superior long-term value from such stochastic raw material can only be achieved through the strict respect of cornerstones Anticipating and preparing for Absorbing shocks shocks Constant risk Controlled risk High Robust capital management appetite diversification shield Bei
Slide 7: Constant risk management
Constant risk management Being very mindful of the risk universe and of its developments EVOLVING HEALTH TRENDS Anti- microbial resistance Emerging Endocrine infectious DETERIORATION disruptors diseases CHANGING OF THE Genetic DEMOGRAPHICS Medication ENVIRONMENT abuse testing Large volcano Declining
Slide 8: Controlled risk appetite
Controlled risk appetite Strictly respecting a well-defined risk appetite with clear limits Risk appetite Risk preferences Risk tolerances Capitalization level: SCOR pursues an approach Solvency target driving of thorough risk selection to Solvency a process of gradual optimize its profile and aim
Slide 9: Dynamically managing the Group's solvency towards the optimal range
Controlled risk appetite Dynamically managing the Group’s solvency towards the optimal range, with a precise policy driving a process of gradual escalation Possible management responses Escalation Action (examples) level Over capitalized Consider special dividends Consider acquisitions 300% SR1)
Slide 10: Monitoring risk drivers and extreme scenario exposures against risk tolerance limits
Controlled risk appetite Monitoring risk drivers and extreme scenario exposures against strict risk tolerance limits 1-in-200 year loss ▐ in EUR millions Estimated solvency Limit range after loss 10% EOF (EUR 980m) U.S. Optimal 460 earthquake range North Atlantic Optimal hurricane1) 660 range Optima
Slide 11: Monitoring risk exposures through scenario-based assessments
Controlled risk appetite Monitoring risk exposures through scenario-based assessments complementing the probabilistic view Simulating “replicas” of key historical natural catastrophes or running specific scenarios based on the Group’s current exposures and capital shield instruments, assessing the i
Slide 12: High diversification
High diversification Building an optimally diversified portfolio of risks Reinsurance fundamentally rests on the principle of mutualizing large risks that are to a large extent independent from each other and so on… U.S. hurricane Wildfire in Flood in Germany Canada Infectious livestock Cyclone in
Slide 13: Probability of 5 risks happening in the same year
High diversification A concrete example… Risk 1 Risk 2 Risk 3 Risk 4 Risk 5 An earthquake in An earthquake in A hurricane in A windstorm in A typhoon in Japan as severe the U.S. as the U.S. as Europe as Japan as severe as or more severe as or severe as or severe as or as or more severe than the more
Slide 14: SCOR benefits from a market-leading diversification benefit
High diversification SCOR benefits from a market-leading diversification benefit ▐ Composition of risk capital before taxes and diversification1) – in % SCOR’s very strong diversification benefit Diversification benefit 49% 34% 37% 22% 23% of 49% reflects the strength of the Group’s 3% 2% business
Slide 15: Robust capital shield
Robust capital shield Transferring risks to protect the Group from the most extreme events Protection mechanisms Contingent capital facility The contingent capital is a pre-defined mechanism to raise new capital and replenish equity in case of extreme events Contingent Size SCOR’s current innova
Slide 16: SCOR is a risk processing plant
SCOR is a “risk processing plant”! “Raw” risks R1 , R2 , R3 … Rk … Rn We study and model risks We select and underwrite risks We combine risks that are to a large extent independent from each other We transfer part of the risks through retrocession and ILS We build a highly diversified and optimally
Slide 17: SCOR has demonstrated superior shock-absorbing capacity and value creation
Applying this “recipe”, SCOR has successfully demonstrated its superior shock-absorbing capacity and value creation capability over the years ▐ Evolution of shareholders’ equity (in EUR bn) and rating (S&P) Hurricanes Michael and Florence, Asian typhoons, California Wildfires Nat cat events Hurrican
Slide 18: Consistently strong profitability with low volatility
Despite major shocks, SCOR has consistently delivered strong profitability with low volatility ▐ Distribution of quarterly adjusted ROE1) since 20062) (in %) 35.2% 24.1% 14.8% 5.6% 5.6% 5.6% 3.7% 1.9% 1.9% 1.9% <0% 0-2% 2-4% 4-6% 6-8% 8-10% 10-12% 12-14% 14-16% 16-18% 18-20% 20-22% Below 4% Between
Slide 19: Consistently strong shareholder remuneration
Despite major shocks, SCOR has consistently delivered strong shareholder remuneration ▐ DPS (in EUR) and yield (in %) Hurricanes Michael and Florence, Asian typhoons, California Wildfires 2.802) 275% 20.0% 250% 18.0% Hurricanes Harvey, Irma and Maria, 225% Earthquakes in Mexico 16.0% 200% Hurricane
Slide 20: SCOR builds on its successful strategy to pursue value creation with its new plan
SCOR builds on the successful strategy implemented over the past years to pursue value creation with its new plan SCOR has successfully concluded “Vision in Action”, delivering on both its targets on a normalized basis and creating considerable value for its shareholders (total shareholder return
Slide 21: Profound transformation to prepare for the future of (re)insurance
Central to the plan is profound transformation to prepare for the future of (re)insurance SCOR accelerates its digital transformation to enhance value creation More than EUR 570 million invested in ~EUR 250 million investment in projects since 2011 technology over aaaaaaaaaa Artificial Big data / Ro
Slide 22: Valuation and performance measurement rules are being overhauled
Current valuation and performance measurement rules are being overhauled to take a more economic view than present accounting standards The new IFRS 17 and IFRS 9 accounting standards will be applied with effect from January 1, 2022 They will represent a very significant change in the industry’s
Slide 23: Full economic value indicators will lead to better recognition of in-force business value
The introduction of full economic value indicators will lead to a better recognition of the in-force business value and the value of new business, demonstrating SCOR’s superior value creation capability SCOR’s full economic value – notably that of its Life in force book – will be better reflected wi
Slide 24: SCOR launches its new strategic plan Quantum Leap 2019-2021
SCOR launches its new strategic plan QUANTUMLEAP 20192021
Slide 25: Appendix
APPENDIX ove) The Art & Science of Risk
Slide 26: SCOR's IFRS 17 program is on track
SCOR’s IFRS 17 program is on track… Clear ambition for the program and on track to deliver by the end of the new strategic plan Implementation now expected January 1, 2022 Fundamental shift towards value-creation measurement, with the Group preparing now Emphasis on value creation in assessi
Slide 27: Balance sheet moves closer to fair value under IFRS 17
…and SCOR stands to benefit as the balance sheet moves closer to fair value under IFRS 17 Insurers will measure insurance contract liabilities at current value, reflecting the time value of money and uncertainty Existing issues with IFRS 4 How IFRS 17 better reflects economic value Future value of i