Fitch Ratings has affirmed France-based companies Prevoir Vie and Prevoir Risques Divers’ Insurer Financial Strength (IFS) ratings at ‘A’. The agency has also affirmed Societe Centrale Prevoir’s (the group’s holding company) Long-term Issuer Default Rating (IDR) at ‘A-‘. The Outlook on all ratings is Stable.
Prevoir’s ratings reflect its solid capital adequacy, resilient earnings capacity and the steady strategy pursued by its conservative management. Offsetting factors include its limited business size, the current and prospective lack of geographical diversification and relatively high exposure to equities and real estate investments. In particular, its limited size and lack of geographical diversification leaves the group exposed to potential industry-wide changes in the French insurance sector.
Fitch expects 2012 technical and financial results to be in line with previous years’. At end-2011, Prevoir Vie, the group’s largest insurance company, had a regulatory solvency ratio of 1.3x the minimum requirement, excluding unrealised gains (3.9x including unrealised gains). Based on this and on the agency’s own risk-adjusted assessment, Fitch considers Prevoir group’s capital adequacy to be commensurate with its current rating levels and expects it to remain so.
Societe Centrale Prevoir’s IDR is one notch higher than it would be under Fitch’s standard notching methodology, reflecting both the lack of any financial debt and the fact that the company directly holds significant financial assets (including cash) in addition to its ownership of the two insurance operating companies.
The company’s relatively low overall risk profile reflects its focus on individual risks and its limited exposure to longevity risk. Fitch views positively that the majority of the group’s premiums are recurrent, which helps to generate stable cash flows.
Prevoir maintains a conservative financial profile in order to continue self-financing growth with its own capital, although the proportion of investments invested in “risky” assets (namely, equities and real estate) is relatively high.
Prevoir Vie (90% of gross written premiums (GWP)) distributes life and protection insurance products. Prevoir Risques Divers (10% of GWP) distributes protection and health insurance products. Societe Centrale Prevoir is a privately-owned holding company; 70% of the capital is held by the descendants of the founding family and 30% by current and former employees.
Prevoir’s core business is to insure individuals and families against death, disability and sickness. It has traditionally focused its franchise on individuals from the middle-income bracket and distributes its products almost exclusively in France through a dedicated network of 850 sales employees. Since 1996, Prevoir group has expanded its insurance operations abroad, although premiums from international activities remain small (2%).
An upgrade of the ratings is unlikely in the near term, given the limited scale and geographical diversification of the group. However, over the longer term, growth in terms of GWP and new business volume along with profitable financial performance and solid capital adequacy could lead to an upgrade.
The key rating triggers that could result in a downgrade include a prolonged period of poor financial performance leading to a depleted capital position. Fitch would also view negatively any significant unexpected change in the group’s conservative risk appetite and management.
