CEO Denis Kesslerpredicted tough times for reinsurers as central banks in Europe and the U.S.show no signs of making significant adjustments to their monetary policies.
"The reinsurance market is … sufferingfrom the ultralow interest rate environment, in some cases negative interestrates," Kessler said while presenting SCOR's first-quarter results."We believe that the pain of persistent low, if not negative, interest ratesdriven by [quantitative easing] monetary policies will last for the foreseeablefuture. This extremely low yield environment is weighing on returns oninvestors' assets."
Kessleralso warned that the overabundance of capital in the reinsurance market causedby a prolonged period of low natural catastrophe losses was continuing to putdownward pressure on rates.
Onan annualized basis, SCOR earned 3.3% on invested assets in the first quarter,down from 3.5% in the year-ago quarter. It reported a consolidated net income group share of €170million for the first quarter, a shade down on the €175 million reported in theyear-ago quarter. Gross written premiums, however, rose to €3.28 billion from€3.12 billion, with those generated SCOR Global Life SE rising to €1.91 billion from €1.73billion.
Premiumsat SCOR Global P&CSE dipped to €1.38 billion from €1.40 billion, a decrease that SCORattributed to the cancellation of its participation in a syndicate and on aretreat from the aviation market. The combined ratio ticked up to89.7% from 89.1%.
Kesslerconfirmed that the company is on track to meet the targets in its currentbusiness plan, calledOptimal Dynamics, which will conclude at the end of the second quarter. Anew business plan will be unveiled in September.
Thelarge amount of capital in the industry has prompted many reinsurers to look toexpand new lines of businesses, such as cyber, nuclear and biohazard. Butquizzed about SCOR's cyber reinsurance ambitions, Kessler said he would adopt amore conservative approach than some of his competitors.
"Weourselves at the moment are of the view that we do not have yet the level oftechnical knowledge and data by which we can be aggressive on the [cyber]market," he said. "We are actively learning and acquiring knowledgeand we are progressing reasonably well. We are also testing the water with anumber of businesses that we accept to write. But this is very well-containedin something that we feel is totally manageable and is not going to impact theoverall profitability target."
Healso complained that regulation in emerging markets stymies the growth of theindustry there.
"Thereinsurance industry is facing an ever-growing number of protectionistregulations, notably in emerging countries, which is affecting the fungibilityof capital," he said, pointing to regulations that limit internalretrocessions in Brazil and India, and mandatory cessions to state-owned orlocal reinsurers in Indonesia.
Despitethe headwinds, Kessler said the April 1 round of insurance contract renewalsshould give investors reason to be optimistic. SCOR's premiums atApril 1 totaled €440 million, up from €420 million in 2015, with pricingdeclines limited to 0.1%.
"Forus there are two main reasons to be satisfied with the results of the April 1renewals," Kessler said. "The first is that they demonstrate ourability to continue to keep the expected performance in line with the grouptargets and the assumptions of Optimal Dynamics. This is achieved by activelymanaging the portfolios and simultaneously seizing opportunities to win sharesof profitable business from existing and new clients. The second reason is thenormalization of [our] relationship with the major Japanese insurance groups."
TreatyP&C premiums written in Japan at April 1 rose to €73 million from €68million a year earlier, while those in the U.S. increased to €100 million from€88 million. The firm wrote €37 million of new business for existing clientsand a further €14 million for new clients.