TEXT-Fitch affirms Generali's German subsidiaries
(The following statement was released by the rating agency)
Oct 19 - Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings on three of Generali Deutschland Group's (GDG) German subsidiaries, as follows:
Advocard Rechtsschutzversicherung AG (Advocard; non-life insurer): 'A-', Outlook Negative
Dialog Lebensversicherungs-AG's (Dialog Leben; life insurer): 'A-', Outlook Negative
Envivas Krankenversicherung AG's (Envivas; health insurer): 'BBB+', Outlook Negative
The affirmations reflect the strong capital levels and sound operating performance of the three companies, as well as the agency's view about the strategic importance of the insurers to GDG. Under the agency's insurance groups rating methodology, Advocard is viewed by Fitch as "very important", and Dialog Leben and Envivas are considered "important" for GDG. This is as opposed to being regarded as "core" entities under the agency's methodology. This is mainly due to their small absolute and relative size, differing branding and the specialist nature of their businesses.
Fitch regards GDG itself as being a core part of Assicurazioni Generali SpA (Generali), which has a Long-term Issuer Default Rating of 'BBB+' and an IFS rating of 'A-', both with Negative Outlook. At current levels, Advocard, Dialog Leben and Envivas' ratings are not benefitting from any uplift from being part of the Generali group. Advocard and Dialog Leben's ratings are being constrained by Generali's ratings, as their standalone assessments are one notch higher. Envivas's rating is in line with its standalone assessment.
Key rating drivers for an upgrade of the three companies include an upgrade of Generali's ratings, which for Advocard and Dialog Leben is currently constraining their ratings. For Envivas, if Generali were to be upgraded, Fitch would expect to factor in at least one notch of uplift from its current standalone assessment of 'BBB+'.
Key ratings drivers for a downgrade include a downgrade of Generali's ratings or a failure to maintain their current operating performance and strong capital levels as measured by Fitch's internal risk-based capital assessment.
Advocard is a legal expense insurer with 2011 gross written premiums (GWP) of EUR205.5m (2010: EUR196.9m) and total assets of EUR381.4m (2010: EUR382.4m). In 2011, the insurer reported a strong and stable gross combined ratio of 94% (2010: 94%) and a small increase in net income to EUR14.1m (2010: EUR14.0m).
Dialog Leben is a life insurer that specialises in term and disability insurance and distributes its products exclusively via independent financial advisors. In 2011, the company reported GWP of EUR220.8m (2010: EUR208.9m) and total assets of EUR563.7m (2010: EUR549.8m). In the current low interest environment, the insurer benefits from its favourable business mix with strong technical and expense results.
Envivas is a fast growing, but still relatively small, health insurer with 2011 GWP of EUR65.9m (2010: EUR54.9m) and total assets of EUR77.9m (2010: EUR59.3m).
GDG operates under a multi-brand strategy with a variety of distribution channels to specifically target individual customer groups. In Fitch's view, the group is well positioned due to its focused strategy combined with improved cost efficiency and underlying profitability, particularly in the non-life segment. The rated insurers benefit from reinsurance from the holding company Generali Deutschland Holding AG, as well as IT and asset management services which are provided via service companies. There are control and profit and loss transfer agreements in place between Generali Deutschland Holding AG and each of the rated entities.
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