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

Nuernberger Beteiligungs AG

20/11/2014 10:57

(The following statement was released by the rating agency)

FRANKFURT/LONDON, November 20 (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

Fitch views NLV, NAV and NKV as core to the Nuernberger group, and their ratings 
are therefore based on a combined group assessment, under the agency's group 
rating methodology.

The affirmation reflects the group's strong capitalisation, its strong results, 
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 the group's 
low geographical diversification, its above-market average exposure to equity 
investments and the current difficult operating environment for German life 
insurers.

Although NLV accounts for more than 80% of the group'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's solvency ratio would be more 
than 160%, which Fitch regards as strong. This compares with the group's 
reported solvency margin of 126% at end-2013 (2012:121%). 

The group's operating leverage was 10.3x at end-2013 (2012: 10.2x), which Fitch 
views as a very strong level, based on the agency's sector credit factor median 
guidelines. This is despite NLV's regulatory solvency margin having declined to 
151% at end-2013, from 167% at end-2012. NLV's FFA - measured as a proportion of 
actuarial reserves - was at 8.6% at end-2013, well in excess of Fitch's estimate 
for the German market average of 5.7%. Fitch expects the group to maintain its 
strong capitalisation at end-2014.

The group reported strong results with pre-tax income of EUR130m in 9M14 (9M13: 
EUR81.5m). The increase was driven by higher investment income and a normalised 
level of weather-related losses after exceptionally high natural catastrophe 
activity in Germany in 2013. The group reported a strong gross combined ratio of 
92% for 9M14, down from 100% for 9M13.

 

The Nuernberger group's equity exposure is higher than the average for German 
primary insurers. As a proportion of total investments, the group's exposure to 
equity investments stood at 8.4%, significantly higher than the market's average 
of 3% at end-2013, meaning that the group is somewhat more exposed to market 
volatility than peers.

The Nuernberger group had total assets at end-1H14 of EUR28.1bn (end-2013: 
EUR26.9bn). Gross written premiums (GWP) at end-1H14 were EUR1.3bn for the life 
segment, EUR0.3bn for the non-life segment and EUR0.1bn for the health segment.

RATING SENSITIVITIES

An upgrade of the ratings in the near- to medium-term is unlikely unless the 
group increases its size/scale and improves diversification, while maintaining 
strong capitalisation. 

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 with NLV's solvency margin falling 
below 150%.

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

Martyn Street

Senior Director

+44 20 3530 1211

Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: 
elaine.bailey@fitchratings.com.

Additional information is available at www.fitchratings.com.

Applicable criteria, 'Insurance Rating Methodology', dated 4 September 2014, are 
available at www.fitchratings.com.

Applicable Criteria and Related Research: 

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756650

Additional Disclosure 

Solicitation Status 

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=929235

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: 
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING 
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S 
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND 
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF 
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE 
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF 
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS 
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED 
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH 
WEBSITE