A.M. Best Rates SCOR's Subordinated Step-Up Notes And Existing Senior Debt.

Business Editors & Insurance Writers

OLDWICK, N.J.--(BUSINESS WIRE)--July 7, 2000

A.M. Best Co. has assigned an initial "a" rating to the EUR 100 million subordinated callable step-up notes due 2020 issued by SCOR. In addition, an initial "aa-" rating has been assigned to SCOR's existing senior debt, as well as an initial "a" rating to the company's outstanding subordinated debt.

The debt ratings reflect SCOR as both the parent company and a major reinsurance operating company. The ratings also reflect the fact that senior debtholders at SCOR rank pari passu with the company's unconsolidated reinsurance obligations.

The A+ (Superior) financial strength rating of SCOR Group is unaffected.

The subordinated step-up notes have a 20-year term with an interest rate of three-month Euribor plus 1.15% to 2010, increasing to three-month Euribor plus 2.15% through maturity. The notes may be redeemed starting in 2010. Management intends to use the proceeds from the issue to fund growth in SCOR's current businesses and to partially finance the acquisition of Partner Life Re.

The ratings reflect SCOR Group's organizational structure, which allows the significant income, cash flow and assets from the parent company's reinsurance operations to be available for interest coverage and debt repayment. The ratings further reflect SCOR Group's significant market profile and scope of operations in France and North America. The company also maintains a less dominant presence in Germany, Italy and Asia. This geographic diversification allows it to operate in a number of reinsurance markets that are less competitive.

Because of its market presence and technical underwriting expertise, SCOR Group is able to attract business from cedants requiring financial stability. SCOR Group's asset quality is excellent, with only 12% of total assets in equity investments. A.M. Best believes the group's capital supporting both life and property/casualty insurance operations is adequate. SCOR Group's strong financial flexibility is enhanced with alternative liquidity in the form of available bank credit lines in excess of EUR 600 million.

SCOR Group's profitability over the past two years has been dampened by worldwide competitive market conditions, particularly in the United States, as well as significant catastrophe losses worldwide, which caused the combined ratio to reach 114% in 1998 and 1999. More significantly, SCOR Group increased its financial leverage in 1999 to 27% (debt/capital) from only 4% in 1998, simultaneously with the impact of adverse financial results. Leverage decreases to 19% after adjusting for securities with hybrid equity features.

Proceeds from the debt issued in 1999 were used for acquisitions, stock repurchase and the financing of premium and asset growth. Higher debt, coupled with declining profitability, caused interest coverage in 1999 to decrease precipitously, to 3.4 times, which is low for the rating category. The issue of interest coverage could constrain SCOR's financial flexibility over the near term. A.M. Best believes the coverage ratios will improve somewhat in the near-term as catastrophe-related losses and profitability improve, although significantly higher debt service requirements will restrain SCOR from reaching historical coverage levels.

The balance-sheet assets of the parent company and debt issuer are more than adequate to pay interest expenses, a fact that significantly mitigates the low coverage and other negative rating factors. As a result, SCOR is not dependent upon cash dividends from its regulated insurance subsidiaries.

SCOR Group's operating strategy has been to focus on the less competitive and more profitable business segments of the property/casualty and life/health reinsurance industry in which it can differentiate itself from its competitors through underwriting expertise and service. The company has directed its growth toward specialty property/casualty reinsurance, which includes credit/surety, large industrial risks, alternative risk transfer and nontraditional reinsurance. In addition, the company has developed its life/health reinsurance products that include life, accident, disability, health, unemployment and long-term care. The life and specialty businesses have contributed to SCOR Group's bottom line, offsetting the negative results of the very competitive standard reinsurance business. A.M. Best believes the unfavorable results of the traditional reinsurance business will continue to offset the higher margined life, health and specialty property/casualty business segment which will challenge SCOR's ability to return to historical profitability in the near term.

SCOR Group, headquartered in Paris, reported consolidated assets of EUR 9.4 billion and shareholder funds of EUR 1.3 at Dec. 31, 1999. SCOR Group is among the 10 largest global reinsurers, providing an array of property/casualty and life, accident and health products.

The following initial security rating was assigned to the debt recently issued by SCOR:

-- "a"-- EUR 100 million cumulative subordinated notes due 2020

The following initial security ratings were assigned to SCOR's existing debt:

-- "aa-"-- senior unsecured medium-term note program

-- "aa-"--five-year convertible bonds

-- "a"--subordinated perpetual step-up notes (Issued by Societe

d'Etudes et de Placements Financiers and guaranteed by SCOR)

-- "a"-- subordinated step-up notes due 2029

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.