LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of PrismaLife AG (PrismaLife) (Liechtenstein). The outlook for both ratings remains stable.
The ratings of PrismaLife reflect its strong risk-adjusted capitalisation and stable financial performance. An offsetting rating factor is the company’s concentrated underwriting portfolio, which makes premium volumes dependent on demand for unit-linked products. This is partially mitigated by PrismaLife’s extensive distribution network and the company’s track record of marketing flexible and innovative product offerings.
PrismaLife’s risk-adjusted capitalisation remains strong, despite modest dividend payments in 2013 and 2014. In 2014, moderate growth in new business is unlikely to put pressure on risk-adjusted capitalisation, as the capital strain will be restricted by limited guarantees on the products underwritten, as well as the low level of investment risk retained. The company’s financial leverage remains within the tolerance levels for the ratings.
Overall pre-tax earnings deteriorated marginally to EUR 4.97 million in 2013 (2012: EUR 5.12 million), driven by a reduction in premium income, as well as initial costs associated with new biometric products. PrismaLife’s underlying margin remains good and is supported by stable fee income and low administrative expenses stemming from its lean organisational structure. The impact of new business strain on earnings is marginal as the company has adopted a regular commission payment system with many of its distributors.
Premium income is volatile and largely subject to demand for unit-linked insurance products in Germany, the company’s core market. In 2013, gross written premiums declined by 18.2% to EUR 168 million, following a significant fall in single premium income. However, regular premium income continued to increase. PrismaLife maintains a good business position in this market supported by its flexible and innovative product offerings, as well as its strong distribution network. Premium volumes are expected to increase to approximately EUR 200 million by 2015, supported by the company’s large and increasingly diversified distribution network and the recent introduction of new products.
A.M. Best believes that PrismaLife is well positioned at its current rating level.
Negative rating actions could arise from a continuous decrease in premium income. In addition, a significant deterioration in PrismaLife’s risk-adjusted capitalisation or a prolonged weakening in profitability could result in negative rating pressures.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This rating announcement has been issued by A.M. Best Europe – Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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