Fitch Affirms PrismaLife's IFS at 'BBB+'; Withdraws Ratings
KEY RATING DRIVERS
The affirmation reflects the life insurer's strong capital position and low investment risk, which Fitch expects will be maintained, and its solid performance in 9M14. The ratings are constrained by PL's small size and scale with total assets of EUR950.4m and shareholders' funds of EUR52.5m at end-2013. Additionally, as a leading provider in this segment, PL faces dependency on unit-linked products as its premium income consisted of 99% unit-linked policies at end-2013.
PL faces limited investment risk as policyholders primarily carry the risk of falling equity markets. Fitch views positively that PL largely reinsures its mortality and disability risks. This risk-averse approach leads to lower regulatory capital requirements, resulting in a regulatory capital position of 959% at end-2013. Fitch expects PL to maintain a strong regulatory solvency ratio under Solvency II. Under Fitch's Prism factor-based capital model, PL's capitalisation is "extremely strong".
PL's gross written premiums (GWP) increased in 9M14 after a reduction in single premium business led to a 18.2% decline of GWP in 2013. Fitch expects that PL's net income was stable in 2014 after EUR2.8m in 2013. This led to an adequate return on assets around of 0.42% in 2013. PL's financial leverage was 31% at end-2013 (2012: 31%) and its fixed charge coverage 4.2x (2012: 3.6x). Both sector credit factors are in line with the rating.
PL's premium development has shown some volatility in the past as consumer demand for unit-linked insurance products tends to be volatile. However, new business volumes are supported by the fact that PL's main distribution partner, Onesty Sales (formed by its sister companies), represent one of the five largest sales organisations within the German life insurance market.
Product diversification in PL's book of business is low. However, PL introduced a biometric product line, called CARDEA.life, including disability, term insurance and unit-linked pension products in 4Q12. In terms of new business, biometric policies had a share of 16% in 2013.
Fitch views the recent management change at PL as neutral to the ratings. This is due to the new personnel's extensive experience in the insurance sector and also because PL will maintain its focus on unit-linked business.
Fitch has withdrawn PL's ratings as PL has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide ratings (or analytical coverage) for PL.
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