OREANDA-NEWS. Fitch Ratings has assigned SCOR SE's EUR600m subordinated notes a rating of 'A-'. The notes are rated two notches below SCOR's Long-term Issuer Default Rating (IDR), with one notch deducted to reflect their recovery and one notch deducted to reflect their risk of non-performance features. This is in line with Fitch's notching criteria.

Fitch has simultaneously affirmed SCOR's Insurer Financial Strength (IFS) rating at 'AA-' and Long-term Issuer Default Rating (IDR) at 'A+'. These actions also apply to the ratings of core operating subsidiaries. The Outlooks are Stable. A full list of rating actions is at the end of this release.

KEY RATING DRIVERS
The proceeds of the subordinated notes are expected be used to call the balance of the issuer's CHF650m subordinated perpetual notes callable August 2016. The securities have been issued with a coupon of 3% and a 30.5 year maturity, callable after 10.5 years. The notes include a mandatory interest deferral feature that would be triggered if the company were unable to meet the applicable Solvency Capital Requirement or Minimum Capital Requirement, as defined in the Solvency II directive.

According to Fitch's methodology, this subordinated bond is classified as 100% capital due to regulatory override within Fitch's risk-based capital assessment and is classified as 100% debt for the agency's financial leverage calculations. Financial leverage and fixed charge coverage are expected to remain commensurate with SCOR's rating category.

The affirmation of the ratings reflects SCOR's very strong financial profile and reinsurance franchise. SCOR's P&C reinsurance division has steadily grown into a well-diversified portfolio, both geographically and by line of business. The division is the major contributor to group operating earnings and achieved a 9M15 combined ratio of 90.8% (9M14: 91.6%). In the medium term, the development and defence of SCOR's market position will be dependent upon the reinsurer's ability to increase its share of key markets and reinsurance lines, in the agency's opinion.

Fitch expects that SCOR's financial leverage will remain consistent with the rating. Although the pre-financing will result in a temporary increase in SCOR's financial leverage, rising to approximately 28% at end-2015, it is expected to reduce to around 21% upon the repayment of the 2016 calls. The agency regards SCOR's capitalisation as very strong, based on a combined assessment of capital metrics.

Fitch recognises that the current operating environment remains challenging for SCOR's and the wider (re)insurance industry. Persistently low interest rates and increasingly intense competition, especially in non-life reinsurance, continue to drive price softening across certain major reinsurance classes. The agency expects SCOR's diversified business profile and prudent underwriting policy to provide resilience to a protracted period of price softening, should this occur.

RATING SENSITIVITIES
Fitch considers an upgrade as unlikely in the near term, but it could be achieved over the longer term if financial performance (including a run-rate combined ratio remaining below 93%) improves further, SCOR's market position continues to develop relative to peers, and the quality of SCOR's capitalisation improves, as assessed within Fitch's Prism FBM.

A downgrade may occur if financial leverage were to rise and remain over 25% or if the overall capitalisation assessment deteriorated to 'strong'. A combined ratio consistently above 100% could also lead to a downgrade.

FULL LIST OF RATING ACTIONS
SCOR S.E.:
IFS rating: affirmed at 'AA-'; Outlook stable
Long-term IDR: affirmed at 'A+'; Outlook Stable
Senior unsecured debt: affirmed at 'A+'
Subordinated debt: affirmed at 'A-'
Junior subordinated debt: affirmed at 'BBB+'

SCOR Switzerland AG
IFS rating: affirmed at 'AA-'; Outlook stable
Long-term IDR: affirmed at 'A+'; Outlook Stable

SCOR Holding (Switzerland) AG
Long-term IDR: affirmed at 'A+'; Outlook Stable

The following SCOR entities' IFS ratings have been affirmed at 'AA-' with Stable Outlook:

SCOR Global P&C S.E.
SCOR Global Life S.E.
SCOR Canada Reinsurance Co
SCOR UK Co Ltd
SCOR Reinsurance Co (US)
General Security Indemnity Co of Arizona
SCOR Reinsurance Co Asia Ltd
SCOR Reinsurance Asia Pacific Pte Ltd
SCOR Global Life Americas Re Insurance Co
SCOR Insurance (UK) Ltd
SCOR Global Life Reinsurance Ireland Limited