AMSTERDAM--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating (FSR) of A (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a” to Compagnie française d'assurance pour le commerce extérieur (la Compagnie) (France) and Coface Re SA (Coface Re) (Switzerland), which are subsidiaries of Coface SA (Coface), the non-operating holding company of the Coface group. The outlook assigned to these Credit Ratings (ratings) is stable.
Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Coface North America Insurance Company (CNAIC) (USA). The outlook of these ratings remains stable.
The ratings reflect the Coface group’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management. The ratings of la Compagnie, CNAIC and Coface Re consider their strategic importance to the Coface group. La Compagnie is the main insurance operating company of the group and the direct parent of all Coface insurance entities, whilst CNAIC is the group’s vehicle to access the North America market. Coface Re is positioned as the intragroup reinsurer.
The Coface group’s balance sheet strength is underpinned by consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the group’s risk-adjusted capitalisation to remain at the strongest level prospectively, supported by good internal capital generation. Offsetting factors include elevated investment risk relative to peers and significant operating leverage driven by the group’s factoring business. Furthermore, AM Best considers the Coface group to be dependent on reinsurance, although the associated risks are mitigated partially by the group’s long-standing relationships with reinsurers of excellent credit quality.
The adequate operating performance assessment reflects the Coface group’s relatively stable performance since the 2008 financial crisis, although results were impacted adversely in 2016 by losses in emerging markets where the group experienced rapid growth. A subsequent change in top management and the introduction of a three-year strategic plan have returned loss ratios to pre-2016 levels. Prospective results are likely to be tested by elevated competition in the trade credit insurance industry, following several years of relatively benign claim experience. However, AM Best expects the group’s operating performance to remain adequate over the medium term, supported by management’s ability to take prompt risk-mitigating actions on non-performing business when required.
The Coface group benefits from a leading position within the global credit insurance market. Although the group is largely a mono-line insurer, its exposures are well-diversified by geography and industry. Fee-based services and factoring businesses in Poland and Germany also provide some diversification.
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