Fitch Upgrades R+V Lebensversicherung AG's IFS to 'AA'; Outlook Stable
KEY RATING DRIVERS
The upgrade follows the upgrade of Genossenschaftliche FinanzGuppe's (GFG; AA-/Stable) and DZ Bank AG's (AA-/Stable) rating (see "Fitch Upgrades German Cooperative Banks and DZ Bank to 'AA-'/Outlook Stable", dated 24 March 2015 on www.fitchratings.com). DZ Bank AG owns 75% of R+V Versicherung AG, which is the holding company of the R+V insurance group.
Fitch regards the ownership of R+V Versicherung AG by DZ Bank AG/GFG as positive, reflecting the agency's view that the bank would support the insurance group, if necessary. This has been reflected in a two-notch rating uplift from the agency's standalone assessment of R+V insurance group.
Fitch continues to view R+V Life, R+V Mutual and Condor as "core" to the R+V insurance group and the ratings are therefore aligned with the agency's view of the R+V group as a whole, in line with our insurance group rating methodology.
The ratings are supported by R+V group's solid capitalisation, strong market position, and robust operating performance. Offsetting these positive rating factors is R+V group's geographical focus on Germany and its moderate underwriting profitability in non-life insurance.
Fitch views the group's capitalisation as very strong, which we expect to be maintained in 2015. In Fitch's Prism Factor Based Model (Prism FBM), R+V group scored "very strong" based on end-2013 financials which Fitch expects to have been maintained for 2014 and to continue in 2015.
Fitch expects all three companies to have maintained strong profitability and above-average funds for future appropriation, expense and lapse ratios in 2014. Investments in equities-to- total invested assets for R+V Life, Condor and R+V Mutual were higher than the German market average of 3.3% at end-2013. Fitch does not view the larger equity exposure as a particular risk, given the group's very strong capitalisation.
The R+V group's primary insurance business is focussed on Germany. The non-life segment reported a net combined ratio of 103.9% for 2013, which was weaker than the German market average of 99.2%. Fitch expects a significant improvement in the combined ratio for 2014 and stable development for 2015.
R+V Life is R+V group's main operating life insurer in Germany, while Condor serves as a specialist for independent financial advisors in individual life and R+V Mutual is a specialist for mid- and high-net worth clients and a pension provider. Measured by gross written premiums (GWP) in 2013, R+V Life is Germany's second-largest life insurer.
The R+V group is one of the top five primary insurance groups in Germany. DZ Bank AG is the largest central bank within Germany's cooperative banking group GFG.
RATING SENSITIVITIES
Key rating triggers for a downgrade include a downgrade of GFG/DZ Bank AG's ratings, a change in Fitch's view of R+V group's strategic importance to GFG/DZ Bank AG or a change in Fitch's view of the entities' core status within R+V group. In addition, a significant weakening of R+V group's standalone financial profile, for example, through a decline in R+V group's Prism FBM score to "adequate" could also lead to a downgrade.
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 group and GFG/DZ Bank AG. Given the recent upgrade of GFG/DZ Bank, Fitch regards an upgrade as unlikely in the near- to medium-term.
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