TEXT-Fitch asgns Garant Versicherungs Aktiengesellschaft Vienna IFS of 'A-'
(The following statement was released by the rating agency)
Sept 10 - Fitch Ratings has assigned Garant Versicherungs Aktiengesellschaft Vienna (Garant) an Insurer Financial Strength (IFS) Rating of 'A-'. The Outlook is Stable.
The Austria-based insurer is a niche insurance provider specialising in credit insurance and political risk insurance mostly focusing on emerging markets. Garant is 83%-owned by the state-owned public Belgian credit insurer, Office National du Ducroire (ONDD).
Garant's rating benefits from a three-notch uplift from its standalone rating reflecting Fitch's view of Garant as strategically 'very important' to ONDD. The rating also reflects Garant's niche positioning as a credit and political insurer in emerging markets, strong capitalisation, extensive reinsurance coverage, liquid investments and adequate but volatile profitability.
The Stable Outlook reflects Fitch's expectations that Garant will keep its current high solvency levels and will further reduce the volatility of its profitability through disciplined underwriting and expense management, particularly as demand for credit insurance increases in light of recent political disturbances in several regions and limited financing options.
Fitch views the company's financial profile as adequate but somewhat volatile, which is inherent to its activities and their close linkage to the international economic environment. Nevertheless, the agency considers Garant's extensive reinsurance coverage, adequate reserving and ability to recover a material portion of claims paid as offsetting factors.
Garant's reinsurance program provides high limits of coverage through quota-share, surplus and excess-of-loss reinsurance coverage as well as through a stop loss cover. Fitch considers the company's reinsurance programme to be a major factor supporting its rating. The agency does not anticipate changes in the current strategy.
In 2011, Garant's gross written premiums (GWP) and net profit totalled EUR21.5m and EUR0.8m respectively. Its Fitch-calculated combined ratio was 94%.
Fitch views the company's capital base to be strong as reflected in a regulatory solvency ratio which stood at 4.9 times the minimum required in 2011.
Although unlikely in the short- to medium-term, a change in Fitch's opinion on Garant's strategic importance to ONDD to 'core' from 'very important' could lead to an upgrade.
The key rating triggers that could result in a downgrade include:
- a deterioration of ONDD's credit quality and/or any alteration in Fitch view of Garant's 'very important' strategic status.
- a deterioration of Garant's standalone credit profile through a decreased solvency level (to below 400%) or a sustained deterioration in the combined ratio to materially above 100%.
For all of Fitch's Eurozone Crisis commentary go to here
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