Best Assigns ‘A-‘ Ratings to Assurances Mutuelles de France

February 22, 2012

A.M. Best Europe – Rating Services Limited has assigned a financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” to Assurances Mutuelles de France (AM), both with stable outlooks.

AM is a mutual reinsurer member of Covéa, the French mutual group. Covéa is a Société de Groupe d’Assurance Mutuelle (SGAM), a vehicle introduced under French law to allow mutuals to group together.

Best said its ratings on AM reflect its “excellent risk-adjusted capitalization after taking account of the impact of its significant investments in affiliated Covéa companies. Taken together, these investments represent over half of AM’s total assets.” According to Best’s risk-adjusted capital model, “these investments are effectively deducted from capital resources.”

Taking into account this treatment of the affiliated investments, Best said it believes that AM “provides strong capital support for its operations.” Best’s assessment “reflects the benefits of membership of Covéa, a leading insurer in France, which includes the possibility of mutual support for members of the SGAM. This can take the form of raising funds from other members or from external sources, once agreed by the SGAM members. Risk-adjusted capitalization is further supported by AM’s solid reserving position and comprehensive retro protection.”

In addition Best’s report noted that the ratings also “reflect moderate expectations for AM’s future performance.” However, Best also indicated that it “will be difficult for the company to produce superior underwriting results due to its modest profile as a following reinsurer on treaties, and expects the company to record a net profit after tax of around €10 million [$13.24 million] in 2011.”

AM recorded gross written premiums of just below €113 million [$150 million] in 2010, down from above €200 million [$264.8 million] in 2009, following the cessation of certain intra-group reinsurance operations.

The account largely comprises property reinsurance (over 80 percent of gross premiums), with most business written on a proportional basis (over 75 percent of gross premiums).

AM’s profile is largely concentrated in Western Europe, notably in Italy, Germany, Austria and Switzerland, with approximately 20 percent of the account written outside Europe, none of which is US-domiciled business.

Best concluded that “upward pressures on the ratings are unlikely at this point. Downward pressures on the ratings could be triggered by a material reduction in key criteria such as financial performance or business profile.”

Source: A.M. Best

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