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AM Best upgrades Covéa ratings following PartnerRe acquisition

22nd December 2022 - Author: Kassandra Jimenez-Sanchez

AM Best has upgraded the financial strength rating of Covéa Coopérations to A+ (superior) from A (excellent), and its long-term issuer credit rating to “aa-” (superior) from “a+” (excellent), while removing its status of under review with positive implications.

coveaAccording to the rating agency, the ratings reflect Covéa’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, very favourable business profile and appropriate enterprise risk management.

AM Best also noted that these rating upgrades reflect the enhanced product and geographic diversification following Covéa’s acquisition of PartnerRe – completed in July 2022 – which led the rating agency to revise its business profile assessment to very favourable from favourable.

“PartnerRe’s profile as a global reinsurer acts as a natural diversifier to Covéa’s operations, which are concentrated in the French market, where the group benefits from a large, well-established customer base and strong distribution capabilities,” said AM Best.

Covéa Coopérations is the intermediate operating holding company of Société de Groupe d’Assurance Mutuelle Covéa, a leading mutual insurance group in France.

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PartnerRe provides both life and non-life reinsurance coverage on a worldwide basis and is among the ten largest reinsurers globally.

According to AM Best, Covéa’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as well as a liquid and conservative investment portfolio and prudent reserving practices.

The rating agency said: “Excess capital is held throughout the group; within the operating entities, the mutual members and Covéa Coopérations. AM Best expects Covéa’s risk-adjusted capitalisation to stay at the strongest level through the medium term, although BCAR scores are expected to decrease in 2022 from the combined effects of the purchase of PartnerRe and an erosion of unrealised gains in the investment portfolio.”

Additionally, AM Best noted, the operating performance assessment takes into account Covéa’s track record of stable earnings, underpinned by a weighted average return on equity of 5.1% for the five-year period ending in 2021.

The rating agency said that Covéa’s results on domestic operations are expected to revert to historical levels in the near term. This is despite the group seeing losses related to the COVID-19 pandemic on business interruption policies in 2020.

AM Best also highlighted that it expects the inclusion of PartnerRe to reinforce the group’s prospective results. The rating agency calculated that PartnerRe generated an average annual pre-tax income of $434 million and an average return on equity of 5.9% for the five-year period ending in 2021.

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