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S&P cuts SCOR to BBB-
Standard & Poor's said it lowered its long-term ratings (including counterparty credit and insurer financial strength) on France-based reinsurer SCOR and its subsidiaries to BBB- from BBB+. The ratings remain on CreditWatch with developing implications.
In addition, Standard & Poor's lowered its short-term counterparty credit and commercial paper ratings on SCOR to A-3 from A-2, and placed the ratings on CreditWatch with developing implications.
The downgrade follows SCOR's announcement Thursday that it is to post a third-quarter net loss of €349 million, mainly as a result of cumulative technical losses of €562 million within discontinued and non-core non-life business lines (excluding credit derivatives).
"These losses, stemming almost exclusively from the group's North American operations for underwriting years 1997-2001, are significantly higher than those previously expected by Standard & Poor's," said S&P credit analyst Marcus Rivaldi.
Maintenance of the CreditWatch placement is in light of SCOR's additional announcement that it is to launch a €600 million rights issue to enhance the group's balance sheet. This has the explicit and strong support of major shareholders, pledging more than 50% of the amount to be raised, and of two banks, the latter having provided a conditional commitment in principle to underwrite the balance of any rights above the amount committed by shareholders.
"Should the rights issue be fully and unconditionally underwritten and the group retain the support of its key cedents and brokers, Standard & Poor's may promptly raise its long-term ratings on SCOR and related entities, although not higher than 'BBB+'," Rivaldi said.
In the event that this improvement to the balance sheet does not materialize, S&P said it might further lower the ratings from the BBB (good) range. S&P said it expects to resolve the CreditWatch placement by the end of December.
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