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Investing.com -- Scor SE shares fell 5% on Friday after reporting weaker underlying margins and a lower solvency ratio, offsetting a quarterly profit beat.
The French reinsurer reported a 22.1% return on equity in the third quarter, exceeding expectations by 3.3 percentage points, and a 6.7% rise in net income above consensus estimates.
Jefferies said the performance appeared strong on the surface but was largely driven by the absence of natural catastrophes rather than operational improvements.
In property and casualty, revenue declined 1.6% at current exchange rates but increased 3.1% on a constant currency basis, slightly ahead of expectations by 1.1%.
The insurance service result surpassed estimates by 7.4%, helped by 1.4 percentage points fewer catastrophe losses and a 1-point more favorable discount rate.
Excluding those factors, the combined ratio missed projections by 1.3 points. The segment’s new business contractual service margin before tax was 1.9% lower than expected, mainly due to foreign exchange effects.
The life and health division missed expectations by 10.9% in its insurance service result.
Jefferies attributed the shortfall to an increase in the risk adjustment that produced €20 million in onerous contracts, while experience variances were a €6 million headwind.
New business contractual service margin before tax missed by 14.9%, and insurance finance income or expense was 6.5% below forecast, also affected by exchange rate movements.
Investment income was 8.4% below expectations, weighed down by higher real estate amortization. Return on invested assets reached 3.3%, missing estimates by 0.2 percentage points, while the regular income yield of 3.5% met expectations.
Total invested assets were 0.3% lower than forecast, and management expenses were 4.5% higher than anticipated.
Group-level pre-tax contractual service margin missed by 2.3%, economic value by 1.4%, and shareholders’ equity by 0.5%. The Solvency II ratio stood at 210%, falling 3 percentage points short of projections.