Fitch affirms Coface's 'AA-' IFS rating

Credit insurer Coface's major group insurance entities have had their 'AA-' IFS rating and 'A+' IDR ratings affirmed by Fitch.

The ratings agency has also affirmed the short-term IFS ratings of Coface SA and Coface Kreditversicherung AG, Coface's German insurance subsidiary, at 'F1+'.

The affirmation is an endorsement of Coface's solid financial profile at the end of 2011, as demonstrated by sound underwriting performance reflected in a Fitch-calculated combined ratio at 89% down from 92% in 2010, and a positive, albeit lower, €74m net profit partly due to non-recurrent items.

The ratings also reflect Coface's solid global business positioning and strong capital levels commensurate with the current rating.

The outlook on all ratings is considered stable, indicating the agency's expectations that Coface will uphold its current capital position and withstand expected increases in corporate insolvencies as a result of conservative underwriting measures implemented since mid-2011 in anticipation of a significant global economic slowdown.

Fitch views the ownership of Coface by parent group Nataxis as a drag on the insurer's rating. It sees Coface's strategic importance to the parent company as limited, and that Nataxis' weaker financial profile means its ability to provide support to Coface would be constrained.

Although unlikely in the medium term, factors that could trigger a rating upgrade include a new and financially stronger shareholding structure in which Coface's strategic importance increases at the same time as the group's standalone financial profile remains strong.

The ratings could be downgraded if the credit quality of Natixis deteriorates to the extent that capital is extracted from Coface to support Natixis, or Coface's standalone profile deteriorated as reflected in increased insolvencies leading to a combined ratio sustainably above 100% and a fall in its current capital levels.