SCOR’s EUR 500 Million 2055 Subordinated Notes: A Strategic Move for Risk-Adjusted Capital Allocation and Long-Term Solvency

SCOR’s recent EUR 500 million issuance of 2055 subordinated notes represents a calculated step to reinforce its capital position while navigating evolving regulatory and market dynamics. With an initial fixed coupon of 4.522% until 2035 and a variable rate thereafter (3-month EURIBOR plus a margin), the structure balances cost predictability with flexibility in a low-yield environment [1]. The notes, eligible as Tier 2 capital under Solvency II, underscore SCOR’s commitment to maintaining a robust solvency buffer, particularly as the industry grapples with the 2025 Solvency II amendments that introduce a tapering parameter (“lambda”) to reduce capital burdens for insurers [2].

The issuance also serves a dual purpose: financing a tender offer for older EUR 600 million subordinated notes due in 2046 and optimizing capital efficiency. By refinancing higher-cost debt, SCOR reduces its long-term interest expenses while extending its capital structure’s maturity profile. This aligns with its strategic goal of maintaining a solvency ratio within the optimal range of 185%-220%. As of Q2 2025, SCOR’s Solvency II ratio stood at 210%, supported by strong operating capital generation and disciplined underwriting [3]. The company’s ability to sustain this level—despite adverse market variances and foreign exchange volatility—highlights its resilience in a sector where capital preservation is paramount.

From a risk-adjusted return perspective, SCOR’s capital allocation strategy is compelling. Its Q2 2025 Return on Equity (ROE) of 22.6% and a P&C combined ratio of 82.5% reflect disciplined risk management and a focus on high-margin lines [3]. The subordinated notes issuance further enhances this profile by providing a stable capital base for growth. For instance, SCOR’s P&C segment generated a new business Contractual Service Margin (CSM) of EUR 225 million in Q2 2025, driven by expansion into diversifying lines like Property Cat and reduced exposure to volatile US Casualty markets [3]. This strategic reallocation of risk exposure, combined with the capital flexibility from the 2055 notes, positions SCOR to capitalize on favorable underwriting cycles.

The regulatory landscape adds another layer of complexity. The 2025 Solvency II amendments, effective from 2027, will recalibrate capital requirements for long-term equity investments and introduce a symmetric adjustment mechanism to enhance risk sensitivity [2]. While these changes may increase capital demands for certain asset classes, SCOR’s high-quality investment portfolio (A+ average rating, 3.9-year duration) and its focus on reinvestment yields (4.1% as of Q2 2025) provide a buffer [3]. The subordinated notes, with their Tier 2 eligibility, will likely remain a critical tool for navigating these shifts, particularly as the industry phases out less efficient capital treatments.

In conclusion, SCOR’s 2055 subordinated notes issuance is a testament to its proactive capital management. By securing long-term funding at favorable rates and aligning with regulatory expectations, the company strengthens its ability to deliver risk-adjusted returns while maintaining a fortress-like solvency position. For investors, this move underscores SCOR’s agility in a sector where capital discipline and regulatory adaptability are key differentiators.

Source:
[1] SCOR successfully places EUR 500 million subordinated notes maturing in 2055 [https://www.globenewswire.com/news-release/2025/09/02/3143037/0/en/SCOR-successfully-places-EUR-500-million-subordinated-notes-maturing-in-2055.html]
[2] Solvency II review 2025 [https://www.deloitte.com/lu/en/our-thinking/future-of-advice/solvency-ii-review-2025.html]
[3] Second quarter 2025 results - SCOR [https://www.scor.com/en/press-release/second-quarter-2025-results]