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 Mutuelle Générale de l’Education Nationale (MGEN) (France). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect MGEN’s balance sheet strength, which A.M. Best categorises as strongest, as well as the company’s adequate operating performance, neutral business profile and appropriate enterprise risk management.
MGEN’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), with low underwriting leverage and a conservative investment profile that is primarily invested in good quality fixed income securities. A.M. Best expects prospective risk-adjusted capitalisation to be supported by modest business growth and full retention of earnings. As a mutual company, MGEN’s financial flexibility is considered limited, which is an offsetting factor to the balance sheet strength assessment.
In line with the mutual’s risk appetite, MGEN aims to price its business for the benefit of its members. As a result, the mutual produces adequate operating performance, with profit before tax (and before exceptional income and expenses) ranging between EUR -19 million and EUR 47 million over the past five years (2013-2017), largely driven by investment income. In order to adapt to changing market conditions for health care insurers in France, such as increasing medical costs or lower deductibles on certain products, MGEN continues to enhance its underwriting approach, which should translate into improved technical profitability over the medium term.
MGEN’s neutral business profile assessment takes into account the company’s leading market position in the French health insurance segment, targeting the niche clientele of teachers and other civil servants. MGEN’s profile benefits from strong brand recognition, broad distribution reach and solid ties with its affinity groups, which together contribute to high levels of member retention. However, with approximately 90% of its total business stemming from domestic supplementary health covers, MGEN is directly exposed to potential adverse developments in France’s social protection landscape. Whilst the business mix is not forecast to change significantly over the medium term, the mutual has engaged in a number of initiatives over recent years in an effort to reduce its significant concentration, including expanding its geographic footprint and developing new value-added products and services with the help of strategic partners.
A.M. Best notes that the recent merger between Groupe Istya, a mutual group of which MGEN was the primary member, and UMG Harmonie Mutuelle, leading to the creation of Groupe VYV, the largest mutual social protection group in France, is expected to further strengthen MGEN’s business position.
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