Fitch cuts SCOR long-term debt to BB+

Fitch Ratings said it has downgraded SCOR Group's major reinsurance entities' insurer financial strength ratings to BB+ from BBB, the company's long-term ratings to BB from BBB-, and the short-term ratings to B from F3.

The ratings remain on Rating Watch negative.

The rating action reflects Fitch's acknowledgment of further reserve deficiencies mostly relating to SCOR's U.S. and Bermuda subsidiaries and its concerns about possible further unfavorable developments. It also reflects the challenges the company is facing in terms of business position and strategic orientation.

The agency has indicated that, if the €600 million capital raising should not be successful, the ratings could be downgraded further, by at least one notch. If it is successful, ratings would most likely be affirmed at BB+.

SCOR has disclosed substantial reserve insufficiencies and losses from discontinued and non-core businesses, mostly related to non-life activities in the U.S. and the group Bermuda operations, totaling €589 million. These insufficiencies mostly relate to underwriting years 1998-2001.

In addition, a charge of €192 million was made against the deferred tax assets. As a consequence the group's shareholder's equity has dropped to a low of €629 million at September 2003.

Fitch said this situation is likely to put pressure on the group's business position and further limit its ability to fully benefit from existing favorable underwriting conditions in a number of reinsurance lines.

Nevertheless, Fitch considers positively the reported support from a number of SCOR's shareholders for the capital increase, as well as the refocusing of the group's underwriting on short-tail risk in order to maximize the profitability of capital employed and reduce risks assumed. Fitch also views favorably efforts made by the new management team to improve internal reporting, underwriting control and claims handling.

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