March 3, 2017 / 5:58 PM / 9 months ago

Fitch Affirms Credendo Single Risk at IFS 'A-'; Outlook Stable

(The following statement was released by the rating agency) LONDON, March 03 (Fitch) Fitch Ratings has affirmed Credendo Single Risk Insurance AG's (Credendo Single Risk; formerly Garant Versicherungs Aktiengesellschaft Vienna) Insurer Financial Strength (IFS) Rating at 'A-'. The Outlook is Stable. KEY RATING DRIVERS The rating reflects Fitch's view of the strong probability of support, if needed, for Credendo Single Risk from its parent, the Belgian state-owned credit insurer, Credendo Export Credit Agency. Fitch views Credendo Single Risk as strategically 'very important' to Credendo Export Credit Agency, under its insurance rating methodology. Combined with what Fitch views as the strong creditworthiness of Credendo Export Credit Agency, this has led to the rating being notched up by three levels from Credendo Single Risk's standalone credit profile of 'BBB-'. Credendo Single Risk is a small specialist underwriter in the credit single risk insurance and is 95.6%-owned by Credendo Export Credit Agency. The standalone profile reflects Credendo Single Risk's strong capitalisation, adequate reserving and extensive reinsurance coverage. Offsetting these positive rating factors are Credendo Single Risk's limited market position due to the small size of the insurer, volatility in profitability and a concentrated risk profile. Fitch regards Credendo Single Risk's capitalisation as strong, despite a drop in total equity (including equalisation reserve) to EUR24.2 million 2016 (2015: EUR29.5 million) and in Solvency II ratio to 130% (end-2015: 181%). The main driver for this drop in capital was a reported net loss of EUR4.6 million in 2016 (2015: EUR1.3 million net income). Credendo Single Risk's reinsurance programme provides high coverage through quota share and excess of loss reinsurance. Fitch views the company's reinsurance programme as a major supportive factor of its ratings. Credendo Single Risk's underwing result deteriorated sharply in 2016, due to large incurred losses. Although the extensive reinsurance programme of the company covered more than 80% of its losses, it reported a EUR6.7 million underwriting loss before equalisation reserve in 2016 (2015: EUR1 million underwriting loss). Its premium decreased 14% yoy on a gross basis, due to the company's more conservative underwriting practices and keen competition in the credit insurance market. Credendo Single Risk had total assets of EUR77 million at end-2016 (end-2015: EUR81 million). Gross written premiums in 2016 were EUR32 million (2015: EUR38 million) of which EUR23 million (2015: EUR21 million) was ceded to reinsurers. Credendo Single Risk Insurance was formerly known as Garant Versicherungs Aktiengesellschaft Vienna and was renamed alongside all other Credendo group members in early 2017 to harmonise the group branding. RATING SENSITIVITIES Although unlikely in the short- to medium-term, a change in Fitch's opinion of Credendo Single Risk's strategic importance to Credendo Export Credit Agency to 'core' from 'very important' could lead to an upgrade as Fitch views the parent's credit quality as higher than that of Credendo Single Risk on a standalone basis. Key rating triggers that could result in a downgrade include deterioration in Credendo Export Credit Agency's credit quality, or an adverse change to Fitch's view of Credendo Single Risk's 'very important' strategic status. The ratings could also be downgraded if Credendo Single Risk's standalone credit profile deteriorates as measured by a net premium written-to-equity ratio of over 1.1x (2016: 0.4x) or a sustained worsening of the combined ratio to materially above 100%. Contact: Primary Analyst Mahsa Delgoshaei Associate Director +49 69 768076243 Fitch Deutschland GmbH Neue Mainzer Strasse 46-50 D-60311 Frankfurt am Main Secondary Analyst Dr Stephan Kalb Senior Director +49 69 768076 118 Committee Chairperson Federico Faccio Senior Director +44 20 3530 1394 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020031 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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