SCOR Buying Sorema S.A. And Sorema N.A.
With the property-casualty reinsurance "moving in the right direction," the "timing is good" for Parisbased SCOR to acquire Sorema S.A. and Sorema N.A., SCOR Chairman and Chief Executive Officer Jacques Blondeau said during a recent conference call.
Mr. Blondeau was explaining motivations behind a 344.5 million euros deal ($298 million at current exchange rates) in which SCOR will buy the two reinsurance subsidiaries of Groupama.
Groupama is Frances second-largest composite insurance group.
The two Sorema companies are being acquired exclusively in exchange for SCOR shares. The deal value–344.5 million euros–is the adjusted net asset value of he two Sorema companies as of Dec. 31, 2000.
"We are buying capital at a good price," Mr. Blondeau said. He said the deal will increase SCORs surplus by 15 percent. This comes at a time "when we need surplus to expand" and take advantage of improving market conditions, he said.
In addition, he said he expects SCOR to keep roughly 250 million euros ($217 million) of business from Sorema.
"I think the acquisition was sort of a natural between two French companies," he said, noting that with synergies in many markets and as a result of the pooling of resources, a savings of between 20 and 30 million euros ($17-$26 million) should be realized.
A big chunk of the savings, he said, would come from savings on catastrophe reinsurance coverage, noting that cat covers had been a large expense for Sorema in the past.
"We are buying the future. We are not the past," Mr. Blondeau said, noting that certain Sorema businesses are not part of the deal. In particular, the runoff of GAN business in the United States and the United Kingdom, as well as large Lloyds syndicates that Sorema created a year ago, are excluded. The syndicates will be sold back to the market, he said. (Groupama acquired GAN in 1998.)
"We are 100 percent confident that we are totally protected from any bad news in the future," Mr. Blondeau said. That protection will come in the form of "normal full-fledged guarantees from Groupama," which cover anything written up until Dec. 31, 2000. There are no "convoluted loss spreading mechanisms" involved, he said.
Discussing the 250 million euros estimate of the amount of business SCOR will keep, Mr. Blondeau said, that while SCOR will likely keep a fair amount of Soremas business in Central Europe, "we dont plan to keep as much U.S. business." While it may be good business, "it is not our cup of tea in terms of our business plan," he said.
Under the terms of the deal, Groupama, which currently owns about 2 percent of SCORs stock (traded on the Paris Bourse), will receive 15 percent more, becoming the largest SCOR shareholder. The agreement specifies, however, that Groupamas holding in SCOR may not exceed 18 percent, without SCORs approval, Mr. Blondeau said.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 4, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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