LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Société Hospitalière d’Assurances Mutuelles (Sham) (France). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Sham’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Sham benefits from a solid position in its niche market, as a leader in the medical professional liability insurance (MPLI) segment in France, where it holds a market share of approximately 50%. The company leverages its strong brand recognition and expertise to provide specialist insurance solutions to the medical profession. As a result, Sham’s insurance portfolio is concentrated, with MPLI accounting for approximately 80% of consolidated gross written premium and 95% of gross technical provisions at year-end 2017. Sham’s concentrated underwriting portfolio is considered an offsetting factor to the business profile assessment. The company manages its exposures of this specialist class of business through disciplined underwriting, pricing and claims handling practices. Additionally, Sham is seeking to diversify its business mix and geographical footprint, notably with the acquisition of the French broker Sofaxis in 2013, and through international expansion within Europe, with the launch of operations in Spain and Italy since 2014.
Sham’s very strong balance sheet is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), a liquid investment portfolio of good quality assets and the mutual’s history of prudent reserving practices. An offsetting factor to the balance sheet strength assessment is the company’s moderate dependence on reinsurance, which Sham uses to support its business model. Although expansion into new markets and concentration in MPLI have the potential to expose Sham’s solvency position to potential volatility, AM Best expects the company’s balance sheet to remain very strong, with a capital base sufficient to support strategic initiatives, thanks to good organic capital generation.
Sham has a track record of adequate operating profitability, evidenced by consolidated operating ratios below 90% in each of the past five years. In 2017, the group recorded a net result of EUR 27.1 million, chiefly driven by an investment result of EUR 52.5 million. Sham’s technical performance historically has been a weaker component of operating performance, driven by management’s prudent reserving philosophy and challenging market conditions, translating to a five-year (2013-2017) weighted average combined ratio of 103.9%, as calculated by AM Best.
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