previously announced industry outsider Benoît Ribadeau-Dumas, upending a previously signposted succession plan.
In plans announced in December, Scor chose former chief of staff to the French Prime Minister Édouard Philippe Ribadeau-Dumas – an executive who had spent significant stints of his career working for major corporations including Thales Electronics Group and Air Traffic Management Systems, including a period as CEO of Thales Underwater Systems.
Ribadeau-Dumas was initially appointed as deputy CEO in January of this year and was slated to become CEO following Scor’s annual general meeting (AGM) in 2022, to gain the experience of the sector necessary to reassure regulators and investors of his suitability for the role.
However, Scor announced on Monday that Kessler would be standing down as CEO a year earlier than planned for “personal reasons”, and with Ribadeau-Dumas presently lacking the industry knowledge needed to satisfy the regulator and take on the role 12 months ahead of schedule, the insider Rousseau was named instead.
He will take up the role after this year’s AGM, with Ribadeau-Dumas set to now bow out quietly (if awkwardly). Kessler will become non-executive chairman at the end of June.
Kessler is credited with rescuing the French reinsurer from the brink of collapse in the early 2000s, after a disastrous set of losses and poor investment results.
Since then, the carrier has been in growth mode – both organically and inorganically – as seen in the vast expansion in group gross written premium (GWP) over the past two decades.
It is a fair assessment to say that Kessler oversaw Scor’s turnaround from a carrier months away from ruin to a top tier reinsurer.
However, critics have also accused Kessler of having too strong a grip on Scor for too long, despite his evident successes. This iron grip partially reflects his tenure and the authority granted by his role leading the turnaround. But it is also in part due to his dual role as both CEO and chairman.
Criticism around such governance issues is, of course, not unique to Scor, and the French regulator is pushing companies more generally to split the positions.
Plans for Kessler’s succession were keenly anticipated and a major question for analysts and investors alike.
And with an heir apparent now in place, the market and investors are asking how Scor will evolve, and to what degree Rousseau will represent the continuity candidate, and to what extent the new broom.
Rousseau was personally hired by Kessler and joined the company as his adviser initially before he was placed under Scor Global P&C CEO Victor Peignet to get to grips with P&C underwriting, but sources describe the incoming CEO as independent-minded and intelligent.
The degree to which Rousseau balances his loyalties to Kessler, the retired Peignet and the established Scor ways with his desire to put his own stamp on the business will be key in determining the future direction of the business.
Rousseau’s background in both banking and reinsurance stand him in good stead as a CEO, with the 3.5% share price jump suggesting the markets also liked the pivot back to an executive with a reinsurance background.
But at just 43 years of age, there are questions around whether he is sufficiently seasoned for the role – although some believe his relative youth could provide the fresh start and vigour needed for the next phase of growth.
Below, we outline Scor’s current market positioning, and key strategic questions for the incoming CEO as he prepares to take the (re)insurer into a new phase of leadership.
The M&A question
Despite its growth trajectory, Scor remains the smallest of the European Big Four on a premium basis, with a 2020 GWP of EUR16.8bn, or around two thirds that of its nearest competitor, Hannover Re (EUR24.8bn).
Scor also trades at a discount to other top-tier European reinsurers, with an average price-to-book value over the past year of 0.77x – significantly below its three larger peers.
Since the Covid-induced market rout of spring last year, the recovery in Scor’s share price has also been less robust than that of its peers, currently down 12.3% since March 2020 compared with Swiss Re’s -4.3%, Hannover Re’s -9.7% and Munich Re’s improvement of 4.5%.
Scor has positioned itself as smaller, nimbler, and more disciplined in terms of underwriting than its behemoth competitors, allowing it to take advantage of market conditions more dynamically than its peers. But the question remains as to how much shareholder value Scor could create with more scale, and how it proposes to reach that optimum size to truly compete with its larger competitors.
And the M&A question still looms large at Scor – both as an acquirer and as a target.
Scor is more weighted towards life business than its European reinsurance peers. For the full-year 2020, 56% of Scor’s business was life and health (L&H), compared with 41% for Swiss Re, 32% for Hannover Re and 28% for Munich Re.
It is well known that Kessler had hoped to execute a strategic P&C acquisition that would balance the group’s portfolio more evenly – and we will return to potential M&A later. In the meantime, the weighting towards L&H has been cause for concern for investors, particularly in the past year, with mounting Covid-19 mortalities weighing on life carriers’ earnings.
Kessler also vigorously fended off a bold takeover bid by French mutual Covea during his tenure. While he argued vociferously for Scor's continued independence, the takeover bid raised questions about the business’s future ownership and direction.
In particular, it also set a psychological anchor point for investors around share price. Covea made Scor an all-cash offer of EUR43 per share in September 2018. At the time, this represented a 21% share price premium – and is far above the carrier’s current share price of EUR29.39.
The Covea approach may have been the wrong deal or perhaps the wrong timing, but that does not preclude Scor from pursuing other, more advantageous deals.
Rousseau’s instalment as CEO could bring a renewed approach to consolidation, which might take in merger activity with suitors such as PartnerRe or TransRe, or even the purchase of Axa XL Re.
In all of these, it is important to note, Scor would be the larger and therefore likely more dominant merger partner, allowing Rousseau to preserve, to a degree, the identity of the reinsurer in which he cut his teeth.
Managing the post-Covid landscape
M&A is not the only large strategic decision facing the new CEO.
In particular – and in common with all reinsurers – Scor is faced with the future repercussions of Covid-19, both in terms of further BI disputes on the P&C side in reinsurance, and the potential for long-tail claims sparked by the forthcoming recessionary environment. Scor will need to weather the storm of these potential losses even as it looks to grow.
And with P&C reinsurance and specialty lines insurance each at their own points in the market cycle, Scor will need to position itself to capitalise on the best available opportunity and prove that it can be nimble in its deployment of capital to optimise returns.
At both Scor and in the wider industry there are pressing questions to be answered about how viable good, stable long-term returns are in P&C reinsurance, with steadily increasing cat and attritional losses on the property side and social inflation on the casualty side – all against the backdrop of historically low yields.
In the past 16 months, Scor seems to have timed the market better than peers, cutting premium at January 2020 when the price increases it could achieve were in the low single-digits and accelerating GWP growth at 1 January and 1 April this year, when it secured increases of 7.8% and 4.3%, respectively.
In specialty insurance, the rating opportunity is arguably greater – and there is a question for Rousseau on how much Scor should push for growth outside of reinsurance.
Long-troubled Lloyd’s arm Channel turned a corner last year and posted its first annual profit since 2011 – ticking off a major strategic priority for Scor Global P&C and Rousseau as the unit’s deputy CEO – which will grant it greater freedoms to grow as the market continues to rise.
Scor also has a UK company market platform and other branches globally to capitalise on the specialty insurance opportunity – but here again the challenge will be navigating this landscape, as signs are beginning to show in London that specialty rates are already starting to taper.
But as Scor looks to seize the opportunities and rise to the challenges ahead, it will do so now with a chief executive in place with a firm footing in the reinsurance market, operating under the watchful gaze of his mentor Kessler in the chairman’s seat.
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