(The following statement was released by the rating agency)
LONDON/FRANKFURT, November 27 (Fitch) Fitch Ratings has affirmed Luxemburg-based
ATLANTICLUX Lebensversicherung S.A.'s (ATL) Insurer Financial Strength (IFS)
rating at 'BBB' and Long-term Issuer Default Rating (IDR) at 'BBB-' with a
Stable Outlook. At the same time Fitch has affirmed ATL's SQ ReVita Value of
Business In-Force transaction and its Salam III Sukuk (Islamic bond) programme
KEY RATING DRIVERS
The affirmation reflects the life insurer's low investment risk, its strong
capital position and its strong performance in 9M13. These positive rating
factors are partly offset by ATL's dependency on unit-linked products and its
relatively small size.
The ratings of SQ ReVita and Salam III are the same as ATL's IDR. This is
because despite having some structured elements, Fitch treats both transactions
as effectively having the same credit characteristics as a senior unsecured
corporate obligation of ATL. This is due to their partly recourse nature, and
what Fitch views as a lack of bankruptcy remoteness in the structure.
ATL faces only limited direct investment risks as policyholders or other
external parties that provide guarantees offered within ATL's products carry the
risk of falling equity markets. Fitch views positively that the remaining
mortality and disability risks are largely reinsured.
Fitch views ATL's capitalisation as strong based on the agency's risk-based
capital assessment as well as the company's regulatory solvency ratio of 195% at
end-9M13 (2012: 178%). Fitch acknowledges that ATL achieves its strong
capitalisation without benefiting from subordinated debt. Fitch expects that ATL
will maintain its strong solvency levels, assuming that the insurer will
continue to upstream only moderate dividend levels to its parent companies, FWU
AG and VHV.
For 9M13, ATL reported gross written premiums (GWP) of EUR96.1m (9M12: EUR95.4m)
and net income of EUR1.9m (9M12: 1.0m; 2012: EUR2.5m). ATL confirmed its 2012
GWP levels as premium income increased by 0.7% in 9M13 (2012: 11.8%). Fitch will
continue to monitor ATL's premium development as customer demand for unit-linked
insurance products tends to decrease when uncertainty about capital markets
increases. In terms of product diversification Fitch views positively that ATL
introduced takaful (Islamic insurance) life insurance products in Germany in
4Q12 and in France during 2013.
ATL's earnings also depend on the market value of assets under management (AuM).
The company achieved a 3.0% yoy increase of AuM to EUR519m at end-9M13, which
supports ATL's earnings prospects. Fitch views ATL's bottom line profitability
as strong. Despite its cost-intensive distribution channels ATL achieved an
annualised return on assets of around 0.6% in 9M13 (2012: 0.56%).
When Salam III's entire USD100m is issued, ATL's total financing commitments to
total available capital (TFC) ratio will increase to 2.3x from 0.7x. Although
this is a relatively high ratio, it does not currently affect ATL's ratings, as
the programme will be paid back through acquisition fees included in the
insurance premiums of the designated block of new business policies and because
of the provisions included in ATL's contractual agreements with its distribution
partners, which significantly reduce the insurer's credit risk arising from
Key ratings triggers for an upgrade include continued improvements in the
company's franchise and scale, and stability in the company's GWP developments
in various countries, while maintaining strong capitalisation.
Fitch views a downgrade of ATL's ratings in the near term as unlikely. However,
a significant and sustained deterioration in profitability resulting in a return
on assets below 0.20% over a prolonged period of time could result in a
downgrade. Additionally, the TFC ratio increasing to more than 3x could lead to
ATL offers unit-linked and term insurance products, predominantly in Germany,
France and Italy. ATL had total assets of EUR588.6m at end-2012 and is owned by
FWU AG (74.9%) and by VHV (25.1%), a medium-sized German insurance group. FWU AG
is owned by nine partners (95%) and SwissRe Europe S.A. (5%).
+44 20 3530 1551
Fitch Ratings Limited
30 North Colonnade
London, E14 5GN
Dr. Christoph Schmitt
+49 69 768076 121
+44 20 3530 1257
Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email:
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 -- Amended
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
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
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.