AMSTERDAM--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Solunion Seguros, Compañía Internacional de Seguros y Reaseguros S.A. (Solunion) (Spain). The outlook of these Credit Ratings (ratings) remains stable.
Solunion is the operating holding company of the Solunion group of companies, a 50-50 joint venture, established in 2013, between MAPFRE Participaciones, S.A.U., a wholly owned subsidiary of MAPFRE S.A. (MAPFRE), and Euler Hermes Luxembourg Holding S.à.r.l., a subsidiary of Euler Hermes Group S.A. (Euler Hermes). Allianz SE is the ultimate parent of Euler Hermes.
The ratings reflect Solunion’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider the strategic and operational support Solunion receives from its joint shareholders. In addition, Solunion benefits from substantial parental support in the form of quota-share arrangements and excess of loss protection, along with its shareholders’ commitment to sustain its capital position above the regulatory requirements.
Solunion’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which remained at the strongest level as at year-end 2018, as measured by Best’s Capital Adequacy Ratio. The balance sheet strength assessment is supported by Solunion’s prudent reserving approach and conservative investment and reinsurance strategies. The company maintains capital buffers to cushion against the effect of a heightened insolvency environment. AM Best expects Solunion to maintain a prudent capital management strategy to support its strategic expansion plans.
Solunion’s operating performance has demonstrated an improving trend over the past five years (2014-2018), delivering a profit in each year and reporting an average combined ratio of 78.5% over the same period. Half-year 2019 results are positive and ahead of budget, despite returning a marginal loss on surety business due to amortisation costs stemming from acquiring MAPFRE’s surety operations in 2018. Headwinds for prospective performance include the uncertainty around the sustainability of the trade credit results given the high level of competition, and the pressure that years of relatively low claims experience has placed on rates and terms and conditions.
Solunion is a relatively small insurer, reporting gross written premiums of EUR 178 million as at year-end 2018, with a product offering limited to trade credit and surety lines of business. The company’s market profile is concentrated in Spain, with some geographical diversification as a result of business underwritten in Latin America. Positive business profile factors include the company’s ability to leverage the trade credit expertise and capabilities of Euler Hermes whilst accessing MAPFRE’s widespread and well-established distribution channels in its target markets.
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