Denis Kessler has made an outstanding contribution to the insurance and reinsurance industry over the course of his career. Perhaps his most visible accomplishment is the rescue of SCOR from its near-collapse in 2002 to one of the world’s leading reinsurance groups today. But his contributions also include important academic works on savings and insurance while he was a university professor and the strong advocacy he has provided for the industry, particularly while he was leading several industry associations.
Major achievements – the SCOR turn-around
Since he became Chairman of SCOR in November 2002, Denis Kessler has transformed a group on the verge of collapse into one of the main global reinsurers (5th largest in the world). The group now operates in more than 175 countries with a workforce made up of 50 different nationalities. The figures below demonstrate how far SCOR has come from its trough:
- Market capitalisation EUR 0.3 billion in 2002 to EUR 4.8 billion as of 16 September 2013
- Shareholders’ equity EUR 0.6 billion in 2003 to EUR 4.7 billion as of 30 June 2013
- Rating BBB- in 2003 to A+ today (based on S&P; other agencies have similarly upgraded)
- Average quarterly ROE since 2005: 10.4%
- Premium income EUR 2.4 billion in 2005 to EUR 10.9 billion expected in 2013 (pro forma for the Generali USA acquisition)
- SCOR employees 1,176 in 2003 to 2150 as at 31 December 2012
- Over EUR 4.3 billion operating cashflow generated since 2006
- More than EUR 1.2 billion in dividends distributed since 2005
SCOR in 2002
In 2002, the Group was going through a severe crisis. There was an accumulation of negative factors, including a mediocre performance by SCOR’s asset management, disappointing results from traditional Property & Casualty reinsurance, heavy deficits in large corporate accounts due to an exceptionally high loss occurrence (the World Trade Center, the AZF plant in Toulouse, an explosion at the Conoco refinery in Great Britain, the floods in central Europe, etc.) and the fall in the financial markets. Moreover Commercial Risk Partners (CRP), SCOR’s Bermudan alternative risk transfer arm, produced particularly bad results due to a number of contracts covering Workers’ Compensation in the United States.
The flow of negative news culminated in the Group’s announcement that it expected to make a loss of EUR 250 million for the full year 2002 and that it would need to massively boost reserves. By that time SCOR was teetering on the edge of collapse.
Change of management and stabilisation of the company (2002-2004)
In order to restore investor and client confidence in the Group and rebuild its capital base, Denis Kessler was appointed SCOR’s new Chairman and CEO on 5 November 2002, one day after having been granted a few hours to accept or turn down this offer on a Sunday. The day after, on 6 November 2012, he was chairing an extraordinary general meeting.
Upon arriving, recognizing the dramatic situation in which the company found itself, Denis Kessler launched on 18 November 2002 a strategic plan called Back on Track to cover the years 2002-2004. The plan’s objective was to achieve a capital increase in order to restore SCOR’s solvency level, to shift underwriting orientation towards more profitable products and markets, to reinforce the Group’s control and to reform its corporate governance.
On 21 November 2002, SCOR announced the launch of a capital increase, structured as a rights issue with preferential subscription rights, to raise up to EUR 381 million. SCOR’s turnaround strategy, as set out in the Back on Track plan, was focused on four key issues:
- Profitability: to base new business and renewals on profit return and risk selection guidelines.
- Rebalancing of the business portfolio: to adjust the geographical balance of its activities, prioritising Europe, Asia-Pacific and the rest of the world outside the United States, and to focus on short-tail business.
- Prudent investment policy: to place the majority of the Group’s investments in bonds and cash or cash equivalents.
- Active management of legacy issues relating to past underwriting years.
Concurrently, Denis Kessler launched management changes and decided to put Commercial Risk Partners (CRP) in run-off.
In May 2003, SCOR also established new corporate governance rules to strengthen the role played by the board. A number of board committees were established, including a Risks Committee, a Strategic Committee, an Accounts and Audit Committee, and a Compensation and Nominations Committee.
Unfortunately, not all of SCOR’s problems were over. Despite successful renewals, the success of the capital increase and the launch of the CRP portfolio disposal, on 4 July 2003 Standard & Poor's Ratings Services lowered the long-term counterparty credit and insurer financial strength ratings for SCOR and its subsidiaries from “A-” to “BBB+”. On 6 November 2003 these ratings were further lowered to “BBB-”.
To improve its capital base, SCOR conducted two further capital increases, thereby allowing the company to continue its recovery. By the end of 2004 SCOR’s stabilisation had been accomplished. Its reserves and capital had been brought back to a robust level and the underwriting structure had been reoriented.
The rebuilding of SCOR into one of the world’s leading reinsurers (2004-2013)
From the 2002-04 nadir and stabilisation, Denis Kessler has led the rebuilding of SCOR’s franchise, financial strength and performance.
Since his arrival at the company, he has reshaped the Group through solid organic growth as well as a number of successful acquisitions. In 2006, SCOR acquired the renewal rights from the Alea Europe Property & Casualty treaty portfolio. This transaction enabled SCOR to consolidate its presence on the major continental European markets on which Alea Europe operated. Also in 2006, the Group acquired the Life reinsurer Revios. The combination of Revios and SCOR Vie created SCOR Global Life, the fourth largest Life reinsurer in the world. This combination also balanced out the Group’s P&C and Life business mix – a distinctive trait of Denis Kessler’s strategic vision, at a time when monoliners were favoured by investors and rating agencies -, in turn enabling the Group to lower its risk profile through better diversification, to reduce the volatility of its results and to optimise the use of its capital – the transaction included badwill of EUR 54 million.
In 2007, SCOR completed the acquisition of Converium, which, like SCOR earlier, had had financial difficulties and had been downgraded to BBB. Valued at USD 2.8 billion, this hostile takeover bid, for which Denis Kessler showed his boldness, elevated SCOR to the position of fifth largest reinsurer in the world. SCOR was able to achieve a rapid turn-around of Converium’s operations.
The acquisition of the US Life reinsurer Transamerica Re in the summer of 2011, followed by the pending acquisition of the US Life reinsurance subsidiary of Generali (announced in June 2013 and expected to close in the fourth quarter of 2013), enable the Group to become the leading Life reinsurer in the US, which is by far the largest Life reinsurance market in the world, thereby enhancing SCOR’s geographic and commercial diversification. Thanks to its unique expertise in terms of acquisitions and due diligence, gained through the previous acquisitions of Revios and Converium, SCOR, under the chairmanship of Denis Kessler, has been able to conduct these two transactions under highly favourable conditions, which notably include badwill of over EUR 100 million for each transaction. The integration of Transamerica Re was completed smoothly in just one year, with no loss of clients, and the integration of Generali USA is expected to take place even more rapidly, thanks to the experience gained with Transamerica Re.
Mr. Kessler has also reshaped the Group’s operations. In 2007, for example, SCOR became the first listed French company to adopt Societas Europaea status, thereby reflecting Denis Kessler’s commitment towards ever deeper European integration. This status gives greater flexibility to capital allocation between the Group’s European entities and guarantees employee rights.
In 2008, the integration of Revios and Converium led to the implementation of an organisational structure based around six Hubs (Cologne, London, New-York, Singapore, Zurich and Paris). The Hub structure enables the Group to maintain close proximity to its clients while allowing for efficient internal controls and generating important synergies.
In October 2008, SCOR created the asset management company SCOR Global Investments, which became the Group’s third operating entity alongside SCOR Global Life and SCOR Global P&C. SCOR Global Investments has since expanded its activities to third-party asset management, including the successful launch in August 2011 of the Insurance-Linked Securities fund “Atropos”, dedicated to insurance risks, which has enjoyed a strong track record to this date.
During the turbulence of the financial markets in 2008 and 2009, SCOR demonstrated the robustness of the strategic business model that it had followed since its recovery. This model comprises the two major, balanced business lines that are Life and Non-Life reinsurance, as well as deep, sustainable client relationships designed to strengthen the Group’s business franchise, technical underwriting geared to profitability, a high level of diversification by line of business and by market, Group protection through the retrocession and catastrophe bond markets, prudent asset management, a very active risk management policy, and finally optimal use of available capital in order to guarantee solvency, which in turn ensures the confidence of SCOR’s clients, employees and shareholders.
Having identified the risk of a sovereign debt crisis back in 2008, Mr Kessler enabled the Group to be one of the rare European financial institutions to have gone through this crisis with no exposure to the sovereign debt of Greece, Ireland, Italy, Portugal or Spain. Similarly, SCOR significantly reduced its exposure to the share markets mid-June 2011, just before the crash in the summer of that year.
The Group has also shown strong resilience to natural catastrophes over the past few years. In 2011, despite a record year in terms of natural catastrophes, SCOR recorded an ROE of 8%, demonstrating the robustness of the Group’s business model with careful underwriting and prudent retrocession.
Since the arrival of Denis Kessler in 2002, the Group has followed a consistent strategy, implementing a series of strategic plans: Back on Track (2002 – 2004), Moving Forward (2004 – 2007), Dynamic Lift (2007 -2010), Strong Momentum (2010 – 2013), and the latest plan for the period 2013 – 2016, Optimal Dynamics. SCOR has delivered on the targets of these plans, with a strong focus on profitability, solvency and growth.
Since 2003, the enhancement of the Group’s financial strength has led to a string of rating upgrades, including during the financial crisis. In 2009, SCOR was the only financial institution to be awarded rating upgrades by all the major rating agencies. SCOR’s rating was again upgraded to A+ in 2012 by all of the four main rating agencies1 - one of the reasons they gave for this upgrade was “the high level of SCOR’s operational performance”.
SCOR has also distinguished itself through innovative use of the capital markets, which includes a contingent capital facility - one of the first of its kind issued by a (re)insurer – and a recently agreed extreme mortality risk transfer contract.
On 4 September 2013, the Group presented its fifth strategic three-year plan, Optimal Dynamics. This plan, which was very well received by stakeholders, aims to strengthen the Group’s position on the global reinsurance market. The two specific targets of Optimal Dynamics are: (1) an ROE of 1000 basis points above the three-month risk-free rate over the cycle; and (2) a solvency ratio in the 185-220% range (percentage of SCR, according to the Group Internal Model).
Other contributions to the insurance industry
Denis Kessler has been a noted advocate of the insurance industry for decades.
At national level, he chaired the Association of French Insurers for more than a decade. His achievements in this position include among others the setting up of a comprehensive public-private partnership for the coverage of terror acts which came into force on 1 January 2002, only a few months after the attack on the World Trade Center in New York City. Almost 12 years later, this scheme is still in effect, to the satisfaction of all stakeholders. As first Executive Vice-Chairman of the French Business Confederation from 1995 to 2002, he championed the interests of businesses and he is still recognized today as one of the most vocal critics of measures such as the 35-hour week.
At European level, Denis Kessler was Vice-President (1996-1998 and 2001-2002) of the Comit� Europ�en des Assurances (now Insurance Europe), and Chairman of its Reinsurance Advisory Board (2009-2010).
At global level, he has been a Board member of the Geneva association for many years. His positions on the lack of systemic risk in traditional (re)insurance as well as on the risks created by over-accommodative monetary policies have been widely noted. He also was the founding Chairman of the Global Reinsurance Forum (2009-2011), which aims at to promote a stable, innovative and competitive reinsurance market environment on a worldwide basis.
Denis Kessler is a graduate of the Ecole des Hautes Etudes Commerciales (HEC Paris), a holder of the agr�gation in Economics and in Social Sciences, and holds a PhD in Economics. Initially known for his works on savings (particularly “Savings and Retirement” in 1982, “Savings and Development” in 1984, “Modelling the Accumulation and Distribution of Wealth” in 1988), he has been an Economics professor at various different establishments including the University of Paris X Nanterre, the University of Nancy and the the Ecole des Hautes Etudes en Sciences Sociales in Paris, where he was appointed Director of Studies in 1990.
His university work led him to be appointed a member of the National Audit Commission in the 1980s – he has been a member ever since – and to be appointed Chairman of the Foundation for Economic and Financial Research (1985-1992).
Awards and Honours (since 2011)
Denis Kessler: 5
- Reinsurance Company CEO of the Year 2013, Reactions London Markets Awards, 26 June 2013
- 2012 Financier of the Year, ANDESE, 19 June 2013
- Industry Personality of the Year, Worldwide Insurance Awards, 5 September 2012
- Reinsurance Company CEO of the Year 2011, Reactions London Markets Awards, 30 June 2011
- Reinsurance CEO of the Year, Intelligent Insurer, September 2011
SCOR group (since 2012):
- Most Popular Foreign-Capital Insurance Company, fifth China International Insurance Summit, 16 May 2013
- Best Reinsurance Company for Life, Global Awards, Reactions magazine, 19 September 2012 (award won for the second consecutive year)
- Best Reinsurance Company for the London Market, Global Awards, Reactions magazine, 19 September 2012
- Risk Carrier of the year, Insurance Insider magazine, 6 September 2012
- Reinsurance Company of the Year, London Market Awards 2012, 4 July 2012
Nominator: Georges Dionne, Professor of Finance at HEC Montreal, holder of the Canada Research Chair in Risk Management and a member of the boards of directors of HEC Montreal and of SCOR Canada.
Seconds: Michael Butt, CEO, Axis Capital Holdings, Ltd.
Cloude Bebear, Axa