Insurer financial strength of the major insurance entities of Coface has been affirmed by Fitch Ratings at ‘AA-‘. The head entity of the group, Coface S.A., has a long term issuer default rating affirmed at ‘A+’, and the outlook on all ratings are stable. The agency has also affirmed Coface S.A.’s and Coface Kreditversicherung AG’s, the German insurance subsidiary of Coface, Short-term IFS ratings at ‘F1+’.
The affirmations reflect Coface’s improved financial profile, as evidenced by its strong overall financial results posted since 2010. This is a result of the stricter underwriting discipline in place since 2009; its solid global positioning; and its strong capital levels commensurate with its current rating.
The Stable Outlook indicates the agency’s expectations that Coface’s credit profile will remain broadly unchanged in the next 12-18 months. Additionally, Fitch believes that although Coface’s strategic importance to its parent company Natixis (‘A+’/Stable) is limited, support is expected to be provided should the need arise.
Since mid-2011, Coface has introduced increasingly selective underwriting measures in anticipation of a significant economic slowdown. As a result, Fitch expects profitability to remain solid, underpinned by prudent underwriting discipline, manageable development of insolvent companies and the quality of Coface’s management team, whose strategy is focused on its core credit insurance business.
The company’s improved financial profile has been supported by the measures taken in response to 2008-2009’s financial crisis, which included tighter policy terms and conditions and tariff increases; and a rise in new business. Consequently, the loss ratio decreased to 52% at end-2010 and 51% in HY2011 compared to 97% in 2009, according to Fitch’s calculations.
Although unlikely in the medium term, factors that could trigger an upgrade include a new, and financially stronger, shareholding structure in which Coface’s strategic importance increases at the same time as the group’s stand-alone financial profile remains strong.
Conversely, the ratings could be downgraded if a new shareholding structure proved to be less supportive of the group’s current ratings or the group’s standalone profile deteriorated.
Coface is the third-largest international credit insurer, with an estimated 20% global market share and gross written premiums of EUR685m at HY2011. It holds strong positions in Europe, built both through acquisitions and organic growth. The group’s competitive advantages are its strong franchise, consistent strategy and IT systems that facilitate streamlined underwriting under strict guidelines. Coface has a strong standing in the complementary businesses of credit information, factoring and debt collection, although those activities are no longer core to the group.
Source : Fitch Ratings
