TEXT-Fitch affirms R+V Lebensversicherung AG's IFS rating at 'AA-';outlook stable

Tue Feb 26, 2013 8:34am EST

Feb 26 - Fitch Ratings has affirmed German life insurers R+V Lebensversicherung AG's (R+V Life) and R+V Lebensversicherung a.G.'s (R+V Mutual) Insurer Financial Strength (IFS) ratings at 'AA-'. The agency has simultaneously affirmed Condor Lebensversicherungs-AG's (Condor) IFS rating at 'A+'. The Outlook is Stable.

KEY RATING DRIVERS

Based on its insurance rating methodology, Fitch views both R+V Life and R+V Mutual as core to the R+V group, and the ratings are therefore aligned with the agency's view of the R+V group as a whole. The agency views Condor as very important to R+V which is supported by Condor's profit-and-loss sharing agreement within the group. Condor benefits from a one-notch uplift from its standalone credit profile.

The ratings are supported by the R+V group's solid capitalisation, good market position, and the strong operating performance. Offsetting these positive rating factors is the R+V Group's geographical focus on Germany.

One of the top 10 insurance groups in Germany, R+V is headed by R+V Versicherung AG, which is 74%-owned by DZ Bank AG ('A+'/Stable). DZ Bank AG is the largest central bank within Germany's cooperative banking sector Genossenschaftliche FinanzGruppe (GFG; 'A+'/Stable). Fitch regards the ownership of R+V by DZ Bank AG/GFG as positive, reflecting the agency's view that it would support the insurance group, if necessary. This has been reflected in a one-notch uplift from the agency's standalone assessment of the R+V group.

R+V Life, R+V Mutual and Condor reported strong regulatory solvency margins at end-2011, well above the market average of 175%. Based on the regulatory ratios and the agency's internal risk-based capital assessment, Fitch views the companies' capitalisation as very strong. The agency expects that R+V Life, R+V Mutual and Condor will have maintained their solid capital position at end-2012.

R+V Life, R+V Mutual and Condor reported a strong operating performance for 2011. Funds for future appropriation, lapse and expense ratios, and premium growth were better than the market average in 2011. Fitch expects that the three companies will have maintained a strong performance in 2012. The ratio of investments in equities for R+V Life and R+V Mutual is higher than the German market average while Condor's is in line with the average. Fitch does not view the levels of the ratios as a particular concern, given the strong capitalisation.

As far as the primary insurance business is concerned, the R+V insurance group is focussed on Germany. R+V Life is R+V's main operating life insurer in Germany while Condor serves as a specialist for independent financial advisors in individual life cover and R+V Mutual serves as a specialist for mid and high net worth clients and pension funding. Measured by gross written premiums (GWP), R+V Life was Germany's second-largest life insurer in 2011.

RATING SENSITIVITIES

Key rating triggers for a downgrade include a downgrade of GFG/DZ Bank AG's rating, a change in Fitch's view of R+V's strategic importance to GFG/DZ Bank AG, a change in Fitch's view of the entities' core status within the R+V group, or a significant weakening of the R+V group's standalone financial profile.

Key rating triggers for an upgrade include an upgrade of GFG/DZ Bank AG's ratings, and the entities maintaining their strategic importance for R+V and GFG/DZ Bank AG. For Condor an additional upgrade trigger is further progress in Condor's integration within R+V which would lead to redefining Condor's strategic status within R+V as core.

In 2011, R+V Life reported gross written premiums (GWP) of EUR4.5bn, R+V Mutual EUR102m and Condor EUR233m. Fitch expects that 2012 GWP growth will have been above-market-average for all three companies.