SCOR SE ($SCR)

Good afternoon, ladies and gentlemen, and welcome to the SCOR First Quarter 2026 Results Conference Call. Today's call is being recorded. [Operator Instructions] At this time, I would now like to hand the call to Mr. Thomas Fossard. Please go ahead, sir.

Good afternoon, and welcome to the SCOR Q1 2026 Results Conference Call. I'm joined on the call today by Thierry Leger, Group CEO; and Philipp Ruede, Group CFO, as well as other Comex members. Can I please ask you to consider the disclaimer on Page 2 of the presentation. And now I would like to hand over to Thierry.

Thank you, Thomas. Good afternoon, everyone. Thanks for joining us today. I'm glad to announce a strong start to 2026 with continued and disciplined delivery at all levels. The group net income reached EUR 220 million in Q1, corresponding to an annualized return on equity of 21.1%. The solvency ratio increased by 5 percentage points to 220%, driven by strong underlying operating capital generation. All our 3 businesses contributed to the solid performance. I would like to point out explicitly that this was achieved, including additional opportunistic buffer building of EUR 300 million and precautionary means 100% IBNR based reserving for the Middle East conflict. The impact of the conflict in the Middle East is twofold. One is the direct impact on our business. As mentioned during the Q4 earnings call, war risk is systematically excluded from standard reinsurance treaties. It is one of the very few exclusions that is truly universal regardless of market cycles or conditions. If war risk is covered, the exposures are priced for and carried mostly by specialized markets. SCOR's participation in this market is limited and within a strictly controlled framework. The second impact is indirect related to foreign exchange and inflation in the context of heightened geopolitical tensions. These secondary impacts are monitored and managed as part of our regular processes in pricing, reserving and ALM. Let me now turn to the P&C renewals in 2026. In a more competitive environment, we have been able to increase the year-to-date premium income by 2.4%, whilst limiting the margin deterioration. We continue to focus on our preferred lines of business in line with our strategy to grow profitably and in a diversifying way. The April renewals represent around 12% of our reinsurance portfolio. We prioritized margin protection and implemented targeted portfolio management actions, including the nonrenewal or resizing of underperforming business. This led to a reduction in premium income but allowed us to maintain the quality of our portfolio, positioning our book for long-term performance. Consequently, the technical results deteriorated by 0.6 percentage points better than the previous renewals. Looking ahead, we prepare for increased competitive pressure. We will continue to apply underwriting discipline and to focus on our preferred and diversifying lines of business. Our priorities are clear: capital allocation to the most profitable and diversifying lines, combined with disciplined underwriting. In an environment that becomes increasingly competitive and shaped by macroeconomic and geopolitical uncertainty, our teams remain focused on executing the Forward 2026 strategy. This has allowed us to deliver excellent results while continuing to reinforce the resilience of the group. I see SCOR well placed to make the best out of the current environment and to deliver on the last year of our Forward 2026 strategic plan. Philipp, over to you.

Thank you very much, Thierry. Good afternoon, everyone. I'm pleased to present our Q1 '26 results. I will focus on the key highlights for the quarter. All 3 business activities delivered a strong Q1 '26. Adjusted net income was EUR 220 million, translating into an annualized adjusted ROE of 21.1%, well above our 12% Forward '26 target. On the P&C side, we delivered a strong ISR of EUR 255 million. Insurance revenues grew by 5.4% at constant FX, driven by a satisfactory set of renewals, although reported growth was impacted by adverse FX effects. The combined ratio stood at an excellent 80.2%, reflecting very strong underlying technical performance. Our Nat Cat ratio of 4.2% reflects a benign quarter with the main impact coming from Storm Kristin in Portugal. Underlying results are solid with a 77.7% attritional ratio that includes additional buffer building. It also includes a mid-double-digit IBNR provision related to the Middle East conflict, reflecting a prudent view of potential further developments. We are also satisfied with our Life & Health results this quarter, reflecting our focus to deliver a steady quarterly performance over the last 5 quarters. The ISR stands at EUR 107 million with all components in line with our expectations, including the CSM amortization rate and the risk adjustment release. The experience variance is also within our expected range of volatility. The Life & Health business delivered EUR 115 million in new business CSM, driven by growth in protection and longevity. We also significantly improved our capital position with a solvency ratio increasing from 215% to 220%. This was supported by strong net capital generation in Q1, in line with our full year '26 guidance of 3 to 5 points of Solvency II capital generation over the year. This translates into an economic value growth of 7.4% at constant economics. The economic value per share increased to EUR 51 at the end of March 2026. We continue our strategy to improve the resilience of our balance sheet, both on the IFRS 17 and Solvency II. To that end, in this quarter, we added an exceptional amount of EUR 300 million buffer to our P&C best estimate liabilities, which was made possible by an internal capital optimization. To conclude, SCOR's strong first quarter performance and strengthened balance sheet confirms the group's positive outlook. This gives us strong confidence in delivering the Forward 2026 plan. And now over to you, Thomas.

Thank you very much, Philipp. On Page 21, you will find the forthcoming scheduled events. With that, we can now move to the Q&A session. Operator, can we take the first question, please.

[Operator Instructions] The first question is from Michael Huttner, Berenberg.

So I saw these fantastic results, and I'm afraid the questions are a little bit on the sideline. But you talked about the retrocession benefit. I wonder if you can explain that a little bit. The only thing I noted is if I do the ratio of ceded premiums or ceded revenues to gross premiums, you actually seem to have bought more reinsurance. It has gone up from 26% to 29%. But that's my math. So that's maybe a bit silly. And the other question is own shares. So your share price is roughly [ 31 ] or something. And you have this option, which expires, I think, in the beginning of June to -- of [ '28 ]. How does that work, please?

Yes. Thank you. So you're absolutely correct. In terms of the insurance revenues, the -- in line with what we communicated last year in terms of the change of structure, we moved from nonproportional excess of loss to more of a proportional cover. And as a result, you see the session rate in terms of insurance revenues going up. However, in terms of ISR and margin ceded, we saw actually improvements in the economics of our retrocession.

And -- but the retro benefit, I think, also alludes to what's going to the...

New business CSM, yes, correct.

Yes.

So that is one place where you see it indeed. So in the new business CSM, you see that we spent less margin on the retrocession.

No number. Okay.

No, no.

To your second question on the option. So I think you mentioned 28th of June, the option expires on the 9th of June, so for your information. But of course, we are well aware of the option and what it represents. All we can say -- all I can say is that we will be rational about it, and we will act in the best interest of our shareholders. It's also -- I also want to make it very clear that we do allocate capital to the most attractive areas and that the option is one of the many options we have at hand, and it's not necessarily the most attractive one at each point in time. Example, Q1, we have privileged balance sheet resilience.

What's resilience?

Sorry, say that again, Michael?

What's resilience? Sorry, I didn't -- acoustically, I didn't hear what...

Yes, balance sheet resilience.

Balance sheet, yes.

Yes.

Thank you, Michael. Can we move to the next question, please?

The next question is from Shanti Kang of Bank of America.

So the first one was just on P&C on the attritional that was 77.7%. And you said that includes an IBNR load for the Middle East and some additional prudence that you've added there. If you strip that out, could you just give us a sense of the year-on-year deterioration in the attritional, excluding that? And then this kind of feeds into my next question, which was just on discounting, which was a bit higher than I'd expected given that we have lower cats. But it seems like you added on the best estimate liabilities as well. So is that feeding through into the discount impact as well for Q1?

Yes. So on your first question, the underlying performance is very strong. And the answer to your question is that there's almost 0 change compared to the previous quarter. And then your second question on the discounting, yes, so mechanically, by adding this buffer to the best estimate liabilities that mechanically increased the discount, this effect is around -- is less than 1 point, but that order of magnitude. And then there is the low Nat Cat activity that mechanically also improves the discounting. So these are the 2 main factors for this relatively high discounting that we observed this quarter.

Okay. And sorry, just to follow up on that. On the loading, could you let us know which lines you did add on? I don't think that was casualty, but I presume the sort of longer tail as a result.

You mean on the best estimate liability.

Yes.

It's across the board. It's IBNR.

Thank you, Shanti. Can we take the next question, please?

The next question is from Andrew Baker, Goldman Sachs.

First one, just any views on the pricing outlook into the midyear renewals would be helpful. And any thoughts around terms and conditions. I guess as we're thinking about sort of price and volume trends, should we be anchoring more in what we saw in January or April? Just any thoughts around that topic? And then secondly, is there any update on the Covea arbitration -- sorry, arbitration process? And I guess relatedly, sorry, just coming back to the call option. My understanding on the call option was that there wasn't an adjustment mechanism for the dividends. So was there any thoughts around exercising it prior to the exit date that's just gone? Or is there any connection with the arbitration process?

Yes. So on your first question, Andrew, the outlook for the midyear renewal, I'd say, remains similar to what we saw at the first half of the year, so a competitive environment. In this environment, our strategy will remain unchanged. We'll continue to prioritize underwriting discipline. In terms of conditions, what we saw in January and in April is broadly stable, and that's what we expect going forward as well. But the market remains competitive, and it will depend on which country, which line of business. But we expect a very similar trend to what we saw in the first half of -- the first quarter.

Regarding the Covea arbitration, we have -- we -- it's still the same news, which means no news so far, and we expect to see this finalized before the summer. So that's with regard to the timing. You made a link to the call option that maybe I got wrong. You asked that there is somewhat a connection with the call option, so we can't see any. You also asked whether theoretically, there's a possibility to call the option between now and the 9th of June. That's technically absolutely possible. And therefore, remains one of the options for us. But again, here, I would like to emphasize that there are other options. And again, in Q1, we have privileged the balance sheet resilience very clearly. I hope I answered your question, Andrew. It was like 2.5 question to read into it.

Yes. You can't blame me for trying.

Thank you, Andrew. Can we move to the next question, please?

The next question is from Will Hardcastle, UBS.

Can you just help me with the capital optimization on the internal retro, I think it is. First of all, is this all own funds benefit? And I'm trying to understand how extraordinary this really is or whether there could be some further optimizations, presumably with Philipp coming in that you could be bringing to the table looking at it fresh. Second question is somewhat linked. I'm trying to work out whether the 185% to 220% optimization range is still something that management would think about hard or whether it still stands really? And if not, what's causing the pivot if there has been one?

So on your first question regarding the internal capital optimization, as you centralize capital into up the -- your legal entity structure, you get a benefit in Solvency II in form of a reduction of the risk margin. And so you're right to point out that this is an improvement in your own economic funds. And then you asked about the outlook. I mean, I can't really predict it. I can only tell you that, of course, you should expect that capital is front and center on my mind. And that, of course, we will look at every stone and turn it and see if there's something more to be optimized.

And I think there is some Philipp effect here, Will. On the solvency optimal range, your question, yes, you're absolutely right, 185% to 220%. That's the optimal range defined for the plan Forward 2026, and this is unchanged and will remain. You have probably in the meantime understood that for the next plan, capital and cash generation will take an even more prominent position in our thinking. So expect an update on this range when we present the new strategic plan.

Thank you, Will. Can we take the next question, please?

The next question is from Kamran Hossain, JPMorgan.

The first one is just coming back to the kind of work you've done on the Solvency II ratio. In terms of the best estimate additions, clearly, very welcome increasing resilience there. You mentioned, I think, in the commentary that this -- the EUR 300 million was exceptional. Do you think you want to continue to add here? And how might that kind of -- what that might mean for solvency going forward? Because I think my conclusion from it all is really that your guidance on capital generation is probably still exceptionally cautious. The second question is on the Life & Health experience variance in the quarter. I mean you're well on track for the run rate for the year on a quarterly basis. Is there anything to read into the EUR 16 million or it's just normal volatility?

Yes. So maybe on your second question, that's relatively straightforward in terms of -- this is totally within what we would expect the normal volatility to be in that sense. And on your first question, yes. So I would say our strategy is to build resilience both in IFRS and in Solvency II, and it has always been. The reason why we felt the need to communicate is just the size of the addition of EUR 300 million. And so you should take the size of this move to be exceptional. Now going further, I think we will update you at Investor Day in the context of the next strategic plan on how we intend to build and use buffers.

Thank you, Kamran. Can we move to the next question, please?

The next question is from Ivan Bokhmat of Barclays.

I mean my first question is just a small follow-up on this Solvency II buffer. Could you help me understand the risk adjustment buffer that you've been building under IFRS 17, does that fully translate into solvency? And therefore, this EUR 300 million just build on top of this? Maybe you could try to help us understand what the buffer might be in absolute terms after -- since you started building it up, it's probably well over EUR 500 million and then EUR 300 million at top. And my second question is related to this limits of the price deterioration of 350 basis points to just 60 basis points that you just mentioned, Thierry. It looks very impressive. Maybe you could give a little bit more color on that and think that would you be able to use similar levels for the June, July renewals? And if I can squeeze in one last question, please? How would you characterize the reinsurance demand? Are we seeing any improvements? Because I think some of your peers in Bermuda have been suggesting that cedents are buying more. So just wonder if you could maybe quantify or give some color how it looks by regions.

Okay. So on your first question, so the resilience that we added the EUR 300 million is really an addition to our Solvency II balance sheet. and it's somewhat unrelated to the risk adjustment where we continue opportunistically quarter-by-quarter to build buffers if the performance allows to.

On your second question, Ivan, the price change of 3.5% reflects basically the price change for business renewed 1 year to the next on a gross basis. In addition to these price changes, you have to take into account portfolio underwriting actions, which you could see in the slide, there was quite a number of it at April 1 and the benefit of retrocession as well. So when you take all of that together at April 1, the net margin deterioration was limited to 0.6 points, and then when we look at year-to-date, that's where we see an overall deterioration year-to-date of 2 points or less. And that's really what you should be focusing on more than the price change.

On the reinsurance demand -- also on the reinsurance demand, Ivan, yes. Jean-Paul?

Yes, sorry. On the reinsurance demand, we do see increased demand from cedents with the price decreases, the ability for cedents to keep some of the savings, but also use some of the savings to buy additional reinsurance. And we do see this, and most of the additional buying has been, I'd say, at the top of programs due to buy more limit. So there is an increase of reinsurance demand, but still today lower than the amount of capital available from the -- a supply on the reinsurance side.

As Jean-Paul was talking, I was thinking about what's the easiest way to explain how we can have a 3.5 points price deterioration, but still have only a 0.5 points deterioration of the combined ratio. So you also -- so beyond what Jean-Paul said and the retro -- positive retro impact, you should also imagine that the business we let go is obviously a business with high combined ratio. So by just letting it go, it has a positive impact on the combined ratio.

Thank you, Ivan. Can we move to the next question, please?

The next question is from Iain Pearce of BNP Paribas.

The first one is just on the capital generation guidance for the full year. So obviously, you've done 5 percentage points even if we sort of normalize for the positive cat, that still puts you in the range for the full year guidance already. So just trying to understand why the sort of implication is for very low capital generation guidance for the remainder of the year. Obviously, I understand the seasonality in it, but just trying to understand why we shouldn't expect much for the remainder of the year. And the second one is just coming back to this point on the call option. I'm not sure the question was fully answered, I understood the answer. Can you just confirm if there is an adjustment for the dividend in the call option with the implication being if you are going to call it between now and the strike date, why you wouldn't have called it before going ex dividend? I just want to understand that. I wasn't entirely clear.

Yes. So on the net capital generation, you're right to note that 5 points is at the top of the range of 3 points to 5 points, but part of it was the low Nat Cat activity in the first quarter. And so we would not change our view on the full year, not knowing what the Nat Cat result would be for the rest of the year. And then on top, there's always some seasonality in the capital generation anyhow. On your second question, you're correct that there is no adjustment to the dividend and the fact that it got ex indeed would be considered.

Thank, Iain. Can we move to the next question, please?

The next question is from James Shuck, Citi.

Yes. Many of my questions have been asked, but I had a couple left, if I can. I guess on the call option, I'm just trying to understand the financial logic of what you just said because if the call option is going to expire in about a month's time, and it's just got to exit on a very healthy dividends, then for all intents and purposes, it looks like you're not going to exercise that call option. But will you allow to sell the call option in the open market? So that's the first question. And then secondly, my understanding of what's happened in terms of the sort of buffering and the increase in resiliency is that you kind of moved about EUR 300 million out of the risk adjustment into the best estimate liabilities. That's one reason why the risk adjustment has gone down despite the very healthy level of new business. So my question kind of is what has that done to the confidence level in each, because you've been steadily moving up the confidence level on the risk adjustment. I think it was 77.5% to 82.5% at full year '24. So presumably, that has come down. And if you move EUR 300 million into the best estimate liabilities, what has that done to the confidence level there?

So yes, in the first quarter, we decided that the resilience of our balance sheet was our priority, and it was a conscious decision to not exercise the option and rather put EUR 300 million into our best estimate liabilities. On your second question, yes, you're correct in increasing the EUR 300 million into the best estimate liabilities. It was compensated by a reduction in the risk adjustment, which again was reduced by the amount of buffer that we chose to build in this quarter. In terms of the confidence level, we would evaluate that again at the end of the year, but it's given as a range, and that range is actually decently wide in terms of monetary value.

I see. And you weren't able to sell the option on the open market, correct?

No. I mean I think we're not day trading the options, no.

Yes, not quite what I meant. But if this is a value in that call option, then it would have made sense to sell it before when a exit is. Isn't it?

Yes. But what I'm trying to say is there are many considerations that go into that decision that what you're suggesting is not as easy as you make it sound in the sense of the complexity of it.

Thank you, James. Can we move to the next question?

The next question is from Darius Satkauskas, KBW.

Two questions, please. The first one is, are you able to provide gross written premium growth year-on-year in the first quarter in both P&C and Life & Health segments? And the second question is, would you be able to give us sort of the moving parts for the numerator and denominator in terms of Solvency II? I think the Solvency I ratio increased by 5 points. What changes did you see in the numerator and denominator? And how much -- how many solvency points did the EUR 300 million contribute?

Yes. So I -- we don't communicate anymore on GWP. So unfortunately, we won't be able to answer your first question. On your second question, we would only communicate first half on the split between own funds and SCR.

Thank you, Darius. Can we move to the next question, please?

The next question is from Ben Cohen, RBC.

I had a couple of questions on the Life & Health division. Could you give us a bit more color about the growth that you saw in the new business CSM. It looks like you're kind of well on track probably to beat the sort of the outlook that you've given there. And the second question was just on the negative cash flow in Q1 in the same division. I think you reiterated that you're going to get to a neutral position for the full year. Could you just talk us through where that delta is going to come from?

Yes. So on the new business CSM of Life & Health, we said repeatedly that on the financial solutions and longevity, it's lumpy, and therefore, it fluctuates from quarter-to-quarter. The good result in terms of CSM was protection and longevity. So we were able to transact a significant notional on U.S. longevity, and that was the reason for the good result in new business CSM in Q1. And then on the cash flow, I would say this is a relatively small number, and we would say broadly neutral, and it's in line with expectations. And we stick to our commitment of 2026 of reaching a neutral cash flow in Life & Health.

Thank you, Ben. Can we move to the next question?

Next question is from Vinit Malhotra, Mediobanca.

Yes. So I'll come up with 2 questions. One is on the April renewals. I mean, so it seems that from reading the presentation that your property cat exposure has gone up or property cat premiums went up, about 4.6 points mentioned here. Specialty lines where you had on the diversifying lines seems to be a bit worse. I'm just curious, most of the cut seems to be in U.S. casualty or casualty and motor. Is that a correct reading? And could you just give a bit of picture on the rationale behind these moves? Also in the context of the current conflict in the Middle East, is there some hope that some of the specialty lines demand improves over time over the next renewals or over the next period of time? So that's on the business side. And just -- I'm sorry to pardon my ignorance, please, but the EUR 300 million buffer, how should we simply read it? Is it -- has there been a benefit to the Solvency II from this EUR 300 million? I mean, how should we easily say that this is the benefit of this number because it's clearly not the prudence building you do every quarter, as you mentioned? And it seems to have affected positively the EOF. How should you like us to read that number, please, if you don't mind clarifying again?

So Vinit, I'll answer your first question. On property cat, the growth we achieved was mainly out of the U.S., where we still see the price adequacy as attractive, sort of in line with what we saw January 1. For the Asian renewals, which is another big part of the April 1 renewal on the cat side, there, our overall exposure was mainly flat because the price decreases were reaching basically a level where price adequacy was just breakeven in our view. So that's what happened on the property cat side. On the other lines of business, we did have a significant reduction of U.S. casualty book renewal on April 1. You have to keep in mind that it's a very small renewal. So dominated by just, let's say, a few renewals where, again, our view of price trends and price decreases led us to take some underwriting actions and reduce our exposure to these portfolios. On the specialty lines of business, it was, I'd say, a very line of business specific and market specific. We saw a growth opportunity on the credit and surety side, mainly coming from India, where we're one of the market leaders of that segment, and we can through our terms and conditions and our pricing. And so there, we see the attractive opportunities. On other lines of business like marine or engineering, the market was more competitive. And there, we slightly reduced our portfolio. So that's the result -- what you see here is the aggregation of all this together.

Which also Vinit answers like your 2.5 question, whether the Middle East might have an impact on some of the specialty lines. So we cannot really see. Jean-Paul, any impact on marine and aviation? We're waiting for it.

Yes, so far, there's been no impact on the April 1 renewals. We'll have to see as Thierry mentioned, the losses that people are forecasting are mainly coming from affirmative well coverage. So that market has reacted. But the other lines of business, not so much yet.

So Vinit, on your second question, if we had not added this prudence, then the solvency ratio that we would have printed is 225%. And so that means that we -- for future shocks, we have these 5 points available, and that's why we insist that this improves the resilience of our balance sheet.

Thank you, Vinit. Can we move to the next question, please?

Yes. [Operator Instructions] The next question is from Michael Huttner, Berenberg.

Just 2. One is on Life and one is on the CMD. So the Life growth, I know one of my peers said it was strong, but I'm still thinking it's quite weak because you came from such a high level in the past. When are we going to see the ramp-up of growth that we were hoping for? Because I think you were switching from mortality to other lines. Yes. And then the other question is on the CMD. You said the next CMD, when is it, please?

On the second question, it's in December 4.

December 4.

Beginning of December. Sorry, Michael, sorry to everyone. It seems the date is not yet fixed. But yes, very beginning of December. Sorry for that.

Okay.

So Pilar, over to you for the Life & Health question.

On the first question, Michael, yes, our teams remain fully focused on delivering the plan in both protection and nonprotection line of businesses, therefore, longevity and financial solutions. In Q1, we've seen that we had a good new business CSM generation, which is coming across all the regions, including protection and as well a good success on longevity strategy. You know that longevity and FinSol are lumpy nature transactions by definition. In any case, it's difficult to predict the execution, but what I can say is that we are very confident by the current pipeline of deals that we have, and we have still 3 quarters to make it happen.

And I was just surprised that you mentioned protection because I thought protection is a bit where you were reducing and it's actually growing.

Protection keeps being a core line of business to us, but I can say we are being very selective. We have our preferred line of businesses depending on the different geographies, and we are pricing case by case according to our disciplined underwriting policy.

But you have a good memory, Michael, because when we introduced the new business strategy in Life & Health in '24, we had as one measure, minimum hurdle on the profitability side. And we expected as a result of it to lose some of our new business due to that hurdle. But actually, Pilar and other members of the Life & Health team have been fighting tooth and nail to keep the business, and we're actually able to keep almost all of that business, which explains why actually on the protection side, we have not seen the reduction that we thought we would see. So we are actually pleasantly surprised to keep the protection business at higher margin. Most of the growth, however, in the next years will be clearly from Longevity and Structured Solutions.

Thank you, Michael. Can we have the next question, please?

That was the last question. So I turn the conference back to you for any closing remarks.

So thank you very much, everyone, for attending this call. The Investor Relations team remains available for your follow-up questions. So please do not hesitate to give us a call. As a reminder, SCOR will release the Q2 '26 results on the 30th of July with a call as usual, at 2:00 p.m. CET. And with this, we are wishing you a very good afternoon. Thank you.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.