Third largest credit insurer down to AA but stable outlook
Fitch Ratings has downgraded credit insurer Coface cutting its Insurer Financial Strength (IFS) from 'A+' from 'AA' and the Long-term Issuer Default Rating (IDR) of its head entity from 'A+' from 'AA-'.
The agency has also affirmed Coface SA's and Coface Kreditversicherung AG's, the German insurance subsidiary of Coface, Short-term IFS ratings at 'F1+'.
All the ratings have been removed from Rating Watch Negative. The Outlooks on the IFS ratings and IDRs are Stable.
Fitch said the downgrade reflects sharper-than-expected deterioration in the group's technical results in 2008 compared with 2007, due to the severity of the current economic crisis and its impact on the group's claims rate. The Fitch-calculated combined ratio (net of reinsurance) increased to around 105% in 2008 from 93% in 2007. But Fitch said: “The ratings of Coface continue to reflect its solid position in the international credit insurance industry, strong capital adequacy and the high quality of its management, which has pursued a consistent strategy.
“During the past eight years, Coface's profitability has been strong, albeit cyclical, with a Fitch-calculated combined ratio (net of reinsurance) averaging 98%. Despite the deterioration in its combined ratio in 2008, it remains within the range of its peers. Fitch considers the group's capital adequacy to be strong on a risk-adjusted basis. At end-2008, its capital base was almost 4x the regulatory minimum requirement.
“Coface's strategy is to continue to expand in its four strategic lines of business - credit insurance, credit information, debt collection and factoring - to provide a comprehensive offer in receivables management services. Fitch believes these developments are likely to increase commercial and operational efficiency over the medium term.
Coface is the third-largest international credit insurer, with an estimated 19% global market share, and a leading export credit insurer, with an estimated 25% market share.
