Scor's '02 Loss Larger Than Expected

One reason the company posted a worse-than-expected loss was its fourth-quarter provisions to write off goodwill and recapitalize Commercial Risk Partners (CRP), a Bermuda subsidiary which will soon be sold off.

"If we don't take this into account, we made a net profit of 39 million euros ($42.4 million) for the fourth quarter of 2002," said Mr. Kessler. Unfortunately, he added, the subsidiary is undergoing trouble and the company decided to write down, in full, the goodwill for CRP for 18 million euros ($19.6 million) and another 51 million euros ($55.4 million) to replenish its reserves.

Mr. Kessler noted Scor signed a letter of intent on March 28 with an acquirer to sell the entity by no later than June 30, 2003.

While declining to identify the buyer, Mr. Kessler added, "the letter of intent has been signed. We are now on the verge of completing this transaction. It should be completed by the end of second quarter of this year."

CRP will be sold for its net book value, and any improvement or deterioration in its reserves would be shared between the reinsurer and the purchaser up to a ceiling of 100 million euros ($108.7 million).

The expected sale of CRP was first discussed earlier this year, when Scor decided, as part of its restructuring efforts, to dispose of the subsidiary or transfer it to a run-off account.

Apart from its Bermuda subsidiary, though, the company also suffered from a continuing decline in financial markets, Mr. Kessler observed. Amid the ongoing equity-markets fall and declining interest rates on bonds, Scor's total investment income dropped by 28 percent, to 326 million euros ($354.4 million) in 2002 from 450 million euros ($489.2 million) during the previous year.

Scor also had a number of positive events to report–its 2002 premium income rose by 2.6 percent to 5.016 billion euros ($5.453 billion). The percentage would have been higher, were it not for the unfavorable exchange rates, noted Mr. Kessler.

"As a matter of fact, we have been quite affected by the exchange rates. As you know, a large amount of our books is in dollars and the decline of the dollar vis-a-vis the euro has affected us." The increase in premium income, at constant exchange rates, would have been 13 percent last year, he added.

Also, Scor's property-casualty reinsurance writings began to improve last year as well, increasing by seven percent, or 17 percent at constant exchange rates. Rate increases, especially in short- to medium-tail classes, helped boost group premium income in this sector, the company said.

"Despite unusually difficult operating conditions, we charted a course for recovery toward the end of the year," said Mr. Kessler, who predicted his company would begin to reap the benefits of its restructuring efforts.

The group should be in a position to start profiting in 2003, Mr. Kessler said, both from improving prices in the reinsurance market and from results of recovery measures already implemented–including the company's recapitalization, the adoption of a rigorous underwriting plan, and a conservative investment policy–which would now allow Scor to refocus on its profitable businesses.