Fitch Affirms Nuernberger's IFS at 'A+'; Outlook Stable

Nuernberger Beteiligungs AG

19/11/2013 10:31

(The following statement was released by the rating agency)

FRANKFURT/LONDON, November 19 (Fitch) Fitch Ratings has affirmed German insurers 
Nuernberger Lebensversicherung AG's (NLV), Nuernberger Allgemeine Versicherung 
AG's (NAV) and Nuernberger Krankenversicherung AG's (NKV) Insurer Financial 
Strength (IFS) ratings at 'A+'. The agency has also affirmed their holding 
company Nuernberger Beteiligungs-Aktiengesellschaft's (NB) Issuer Default Rating 
(IDR) at 'A-'. The Outlook on all ratings is Stable. NB's EUR100m subordinated 
debt has been affirmed at 'BBB-'. 

KEY RATING DRIVERS

The affirmation reflects Nuernberger group's (NG) strong results, improved fixed 
charge coverage and reduced debt leverage at end-2012. NG achieved a net 
combined ratio of 95.8% in 2012 which was better than the German non-life market 
average of 96.3%. However, weather-related claims activity in Germany led the 
gross combined ratio to increase to 100% for 9M13 (9M12: 90.6%). 

The affirmation also reflects NG's strong capitalisation, its leading position 
in the German unit-linked life and disability market, and its resilience to a 
persistently low interest rate environment compared with many of its 
competitors. Offsetting these positive rating factors is NG's low level of 
segmental and geographical diversification and its modest market position in 
non-life and health insurance.

Although NLV accounts for more than 80% of NG's total assets and regulatory 
group solvency requirement, German solvency rules allow only limited recognition 
of NLV's funds for future appropriation (FFA) within the group solvency 
calculation. If the full FFA were to be included as it is in the individual 
entity solvency figures, the group solvency ratio would be more than 170%, which 
Fitch regards as a strong level.

NG reported a group solvency margin of 130% at end-2012 (2011:117%). However, 
NLV's FFA - measured as a proportion of actuarial reserves - were at 9% at 
end-2012, well in excess of Fitch's estimate for the German market average of 
6%. Fitch expects that this ratio will decrease slightly by end-2013, in line 
with the market as a whole. 

NLV's life new business increased 4.6% (measured in annual premium equivalent, 
APE) and gross written premiums (GWP) 5.4% in 2012. This compares with the 
German life market's reported decline in APE of 2% and an increase in GWP of 
1.1% for the same period. However, Fitch expects NG's 2013 GWP growth to be 
worse than the market average as NLV has started to reduce its single premium 
business while the market has grown to date in 2013. The agency expects NLV's 
regular premium growth to remain stronger than the market average.  

NG reported pre-tax income of EUR81.5m for 9M13 (9M12: EUR120.3m). Fitch 
believes that the decline was primarily driven by high natural hazardous 
activity in Germany in 9M13. Also the low investment yield environment continues 
to reduce the running yield of insurers' fixed income investments. 

NG's fixed charge coverage improved to 9.2x in 2012 (2011: 4.4x) which Fitch 
regards as adequate for its rating. In addition, financial leverage decreased to 
15% at end-2012 from 20% at end-2011. Fitch expects NG to maintain fixed charge 
coverage in line with its rating in 2013. 

RATING SENSITIVITIES

Fitch views an upgrade of the group's ratings as unlikely in the near- to 
medium-term. However, key rating triggers for an upgrade over the longer term 
would include continued strong underwriting profitability and significantly 
improved market position and scale.

Key rating triggers for a downgrade include weak overall profitability on a 
sustained basis which may be manifested in a return on equity below 6% and/or a 
sustained material erosion in capitalisation in the form of NLV's solvency 
margin falling below 150%.

NG had total assets at end-1H13 of EUR25.8bn (end-2012: EUR25.2bn). The life 
segment reported GWP of EUR1.3bn (1H12: EUR1.4bn), the non-life segment GWP of 
EUR0.4bn (1H12: EUR0.4bn) and the health segment GWP of EUR0.1bn (1H12: 
EUR0.1bn) for 1H13. 

Contact:

Primary Analyst

Dr. Christoph Schmitt

Director

+49 69 7680 76 121

Fitch Deutschland GmbH 

Taunusanlage 17 

60325 Frankfurt

Secondary Analyst

Dr. Stephan Kalb

Senior Director

+49 69 7680 76 118

Committee Chairperson

Chris Waterman

Managing Director

+44 20 3530 1168

Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: 
hannah.huntly@fitchratings.com.

Additional information is available at www.fitchratings.com.

Applicable criteria, 'Insurance Rating Methodology', dated 13 November 2013, are 
available at www.fitchratings.com.

Applicable Criteria and Related Research: 

Insurance Rating Methodology --Effective Aug. 19, 2013−Nov. 12, 2013

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715468

Additional Disclosure 

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http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=808512

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