Coface gains rating lift on more diversification and less volatility

Credit insurer Coface has secured a positive rating outlook from  Moody’s on reduced earnings volatility and increasing diversification of the group.

The rating agency has confirmed the insurance financial strength rating (IFSR) for Coface at A2, and changed the outlook to positive from stable.

Moody’s stated that the rating reflects Coface’s “strong capitalisation, good profitability and limited exposure to Russia.”

The insurer is said to have consistently maintained a group’s solvency ratio above 190% since 2020 and the ratio has a “low sensitivity” to financial and macroeconomic shocks, reinforced by recent improvements in the group’s asset quality. Additionally, it is noted that Coface’s profitability has been very strong in the last five years, with an average combined ratio of 75% between 2017 and 2021.

Moody’s also believes that, since 2016, “the group has improved its risk monitoring processes and it has been more proactive to adjust its risk portfolio”. Moody’s expects “these improvements to translate into less ample shocks on the group’s combined ratio going forward, even if earnings volatility will remain a feature of the credit insurance industry.”

In its outlook, the rating agency highlights that this change reflects the “increasing diversification of the group and the enhanced monitoring and improved management of credit risk exposures which Moody’s expects to result in lower volatility in profits and make the insurer better placed to weather an economic downturn.”

Commenting on the outlook change, Phalla Gervais, chief finance & risk officer of Coface, said: “We welcome this change of outlook, which rewards Coface teams’ work and recognises the high level of service offered to our clients. It also recognises Coface’s agility and resilience, as well as the quality of its risk management, which are at the heart of our culture and expertise. Coface is confident to deliver its Build to Lead strategic plan.”

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