What does the issuance of €500 million subordinated notes maturing in 2055 imply for SCR’s cost of capital and credit rating?

Impact on SCR’s cost of capital

The €500 million subordinated note tranche adds a new layer of long‑dated “Tier 2” capital that can be counted toward SCR’s regulatory solvency ratio. Because the notes sit at the bottom of the debt stack, they are cheaper for the insurer than issuing fresh equity—investors will accept a modestly higher spread than senior paper but still price the securities below the equity hurdle rate. In practice the transaction pushes SCR’s weighted‑average cost of capital down by a few basis points, a sign that the market views the insurer as having adequate capacity to absorb new capital without diluting existing shareholders.

Implications for the credit rating

Credit‑rating agencies treat subordinated‑debt issuances as a “buffer” that strengthens the balance sheet. Assuming the proceeds are used to bolster Tier 2 reserves rather than fund new under‑written risk, the rating agencies will likely view the move as a proactive capital‑management step, which can either (a) preserve the current rating or (b) trigger a modest upgrade if the added buffer improves the capital‑to‑risk ratio to a new, more comfortable threshold. The long‑dated 2055 maturity does not, in itself, raise concerns—rating bodies focus more on the quality of the capital tier than on maturity length.

Trading angle

Actionable take‑away: The issuance signals a solid capital “top‑up” that should underpin SCR’s solvency and keep funding costs restrained. In a market that still prices SCOR’s credit spread at a relative premium (sentiment 80 % positive), equity may retain upside, especially if a rating‑upgrade materialises. Consider buying SCR stock on any technical pull‑backs to test‑the‑level (e.g., a 10‑15 % dip from recent highs) while keeping a close watch on rating‑agency commentary in the next 4‑6 weeks. A downgrade surprise would be the primary downside risk; otherwise the capital‑raise is likely to support a modest rally.