(The following statement was released by the rating agency)
PARIS, August 11 (Fitch) Fitch Ratings has affirmed Garant
Aktiengesellschaft Vienna's (Garant) 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
needed, for Garant from its parent, the Belgian state-owned
Delcredere Ducroire (formerly ONDD). Fitch considers Garant as
'very important' to Delcredere Ducroire, under its insurance
This, together with what Fitch views as strong creditworthiness
Ducroire, has led to the rating being notched up by three levels
standalone credit strength. Garant is a small, niche player in
risk insurance business and is 95.6%-owned by Delcredere
On a standalone basis, Garant remains very strongly capitalised
as reflected in
a regulatory solvency ratio that at FYE13 was 4.5x the required
company's gross written premiums increased to EUR33.3m at FYE13
from EUR29.4m at
FYE12, reflecting continued demand for political risk insurance.
Nevertheless, its underwriting performance can be volatile and
was weaker in
FY13 with a combined ratio of 97.5%, up from 87.3% in FY12,
according to Fitch
calculations. Its expense ratio, however, fell sharply to 21% at
32.4% at FYE12. In addition, net profit materially decreased to
FYE13 from EUR3.8m at FYE12; however, this does not affect the
capitalisation is strong.
The company has a prudent investment strategy, but in FY13 the
was negatively affected by value adjustments and foreign
Garant makes extensive use of reinsurance, which Fitch believes
is adequate for
the risks the company assumes. Nevertheless, there is
concentration risk in the
company's core business as Garant specialises in credit
insurance and political
risk insurance, focusing mostly on emerging markets.
Fitch views the company's financial position as adequate but,
because of the
activities of its policyholders and their close linkage to the
environment, claims against it are likely to be somewhat
volatile. The agency
considers Garant's adequate reserving and its ability to recover
portion of claims paid over time as offsetting factors. Fitch
expects Garant to
reinforce its disciplined and selective underwriting policy in
the near future.
Garant's reinsurance programme provides high coverage through
excess-of-loss reinsurance coverage as well as through a
stop-loss cover. Fitch
considers the company's reinsurance programme as a major factor
rating and does not expect material changes to the current
The Stable Outlook reflects Fitch's expectations that Garant
will maintain its
solid solvency level and reduce the volatility of its
disciplined and selective underwriting. This is particularly
important as demand
for credit insurance is likely to remain strong in light of
disturbances in several regions and limited financing options.
Although unlikely in the short- to medium-term, a change in
Fitch's opinion on
Garant's strategic importance to Delcredere Ducroire to 'core'
important' could lead to an upgrade as Fitch views the parent's
as higher than that of Garant on a standalone basis.
Key rating triggers that could result in a downgrade include
Delcredere Ducroire's credit quality and/or an adverse change to
Fitch's view of
Garant's 'very important' strategic status, deterioration of
credit position through a lower solvency level to below 400%
(FYE13: 451%) or a
sustained deterioration in the combined ratio to materially
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Fitch Ratings S.A.S.
60 rue de Monceau
+33 1 44 29 91 37
+44 20 3530 1394
Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153,
Additional information is available at www.fitchratings.com.
Applicable criteria "Insurance Rating Methodology", dated 13
November 2013, are
available, at www.fitchratings.com.
Applicable Criteria and Related Research:
Insurance Rating Methodology
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