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Insider in Full: Scor succession: Third time lucky for a CEO transition?

Scor’s surprise announcement that it was replacing CEO Laurent Rousseau with current Swiss Re group CUO Thierry Léger will raise questions about how the reinsurer can transition to an expansive mode while it remains in remediation...

Rousseau’s immediate departure comes mid-way through a painful process to restore the reinsurer’s profitability and just 18 months after his installation as CEO. Léger will take over in May, with current COO François de Varenne taking the role on an interim basis.

The Scor share price was trading down over 7% after French markets closed on Friday, indicating investors’ uncertainty around the fate of Scor and their displeasure at yet another succession surprise.

Below, we set out events leading up to this latest succession, and the challenges still facing Léger as he takes the reins.

A (too) quick change 

A question arises from the CEO switch as to whether this is a quick and wise reaction from the board to stop what it perceives to be a failing strategy in its tracks, or an example of corporate impatience.

Rousseau’s 18-month tenure has certainly been challenging and got off to an unusual start. Scor initially appointed former government adviser Benoît Ribadeau-Dumas in December 2020 to take up the CEO role the following May, only to upend this plan in May 2021 and put Rousseau in charge.

Since then, results that were far from solid have taken a turn for the worse. During 2022, Scor as a group as well as its P&C unit registered an operating loss in quarters one to three.

Scor’s share price is the only one of the Big Four European reinsurers that ended 2022 below where it started and its price to book multiple has been consistently lower than that of its peers – and that makes it vulnerable to takeover.

It’s a poor outcome for investors at face value but it is arguable that Rousseau inherited many of the challenges facing Scor.

As we outlined in this piece published just after Rousseau’s ascension to CEO (Revitalising Scor: Rousseau’s strategic challenges), the new chief was tasked with tackling a number of embedded problems within the French carrier.

Among the main challenges were to rebalance the P&C and life and health (L&H) books of business; de-risk its cat book; improve operational efficiency and achieve the necessary scale it needs for its next evolutionary phase.

Rousseau’s record 

During his tenure, Rousseau had made bold strides to improve Scor’s lot, with a determined focus on improving underlying profitability, getting cat exposure under control and creating a more efficient corporate structure.

By Q3 2022 Scor was able to offer up concrete examples of how its cat de-risking programme had improved its performance – even as it booked a EUR517mn cat load from the quarter, much of which stemmed from Hurricane Ian and French hailstorms.

Scor said it had cut its cat exposures by 20% during the first three quarters of 2022. It added that its market share for the Hurricane Ian loss was around 0.4%, compared to 1.3% for Hurricane Michael and 1% for Hurricane Irma.

It had also partially delivered on its shift away from treaty reinsurance and more towards primary specialty business, as well as the rebalancing away from L&H.

In terms of organisational efficiency, Scor said it had achieved EUR20mn in cost avoidance by the end of Q3 last year, maintained a flat headcount from 2021, and completed a group reorganisation designed to improve efficiency.

Analysts reacted positively to this update, with some calling it a turning point or a “line in the sand” after so much previous volatility.

But as explained above, these efforts have not yet begun to manifest in group or even P&C segmental profits this year (although we have not yet seen Q4’s numbers) and it would appear that the work done so far is either not enough in itself, or not fast enough to satisfy the board.

There were also complaints that Rousseau had not communicated publicly a broad strategic direction for the company, although some believe he would ultimately have aimed to model Scor, in terms of nimbleness and efficiency, on businesses such as Hannover Re.

This lack of a grand strategic vision – at least one that had been announced publicly – contrasts directly with the tenure of predecessor Kessler, who was fond of wide-ranging multi-year group strategies.

On taking the reins, Rousseau immediately postponed the publication of Scor’s next group strategy and extended the two-year “Quantum Leap” plan.

The market had been expecting the next multi-year strategy in Q3 last year, but this was replaced with a single-year strategy focusing on restoring profitability, achieving cost savings of EUR125mn per year and capitalising on P&C market hardening.

Finally, the French business press has reported on a difference of strategic opinion between Rousseau and his one-time mentor Kessler, whose sway on the board as chairman and long history with the company could have proved a stumbling block for an embattled CEO.

Scor has made it clear Léger will be bringing in a new strategic plan early on, as Kessler said that the company needed “fresh strategic impetus, new momentum and new drive” so it can consolidate its position as a leading reinsurer.

The task ahead for Léger 

Léger is a high-pedigree hire for Scor, with more experience in global reinsurance than Rousseau, and hails from the largest reinsurer in the world – Swiss Re.

On paper there are a number of advantages to hiring Léger, not least his long experience. High-profile CEOs may also have an advantage in attracting senior talent to a business.

Scor has had few leadership changes, outside of the US, since Rousseau took over, and it is arguable that after a period of underperformance, a changing of the guard is more sensible than continuity.

Léger’s broad CV covering both P&C and L&H is also a positive for Scor, which is trying to utilise the hard P&C market despite its legacy cat issues while also seizing post-Covid opportunities in the life market.

There are questions, however, as to how he will run the business.

Léger has spent his entire reinsurance career at Swiss Re since joining as an underwriter in 1997, and the business is a very different beast from Scor.

Most obviously, Swiss Re is known for its sheer scale and the breadth of its offering, but it also has a reputation for a large cost base and a fluctuating risk appetite. This appears to contrast with the task Léger faces, as Scor embarks on a mission to become more efficient, and trade with partners consistently while also getting a handle on cat volatility.

Whether Léger will import some elements of Swiss Re’s strategy to Scor or continue Rousseau’s quest for efficiency and agility remains to be seen.


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