LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Credendo – Single Risk Insurance AG (Credendo – Single Risk) (Austria). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Credendo – Single Risk’s balance sheet strength, which A.M. Best categorises as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the support of Credendo – Single Risk’s majority shareholder, Credendo Export Credit Agency. A.M. Best expects Credendo Export Credit Agency, which is the operating holding company of a group of trade credit and political risk insurance companies, to continue to provide support to Credendo – Single Risk due to its importance to the group, particularly as a means of diversification.
Credendo – Single Risk’s balance sheet strength is underpinned by consolidated risk-adjusted capitalisation at the strongest level at year-end 2017, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet strength assessment also factors in the company’s good liquidity profile and low net underwriting leverage. A.M. Best’s view of prospective risk-adjusted capitalisation includes consideration of a capital increase of approximately EUR 40 million that is expected in the first half of 2018 from Credendo Export Credit Agency. A partially offsetting rating factor is the company’s material dependence on reinsurance.
The company has a weak earnings track record, as demonstrated by a five-year return on equity of -3.6%. Underwriting losses have been reported in each of the past three years (2015-2017), largely due to an increase in claims frequency, including an increase in the number of large losses. Underwriting performance has been volatile, reflecting the company’s focus on emerging market risks that are highly correlated with changes in the global political and economic environment. However, prospective underwriting performance is likely to improve due to adjustments to the company’s underwriting practices and strategy.
Credendo – Single Risk’s limited business profile reflects its relatively small size and absence of diversification as a mono-line credit insurer operating in a highly competitive and volatile market environment.
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