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FOR IMMEDIATE RELEASE
LONDON - MAY 03, 2019 02:18 PM (EDT)
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Mutuelle Générale de l’Education Nationale (MGEN) (France). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in AM Best’s interactive rating process.
The ratings reflect MGEN’s balance sheet strength, which AM Best categorises as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
MGEN’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Underwriting leverage is low, and the investment portfolio is relatively conservative, primarily comprising good quality fixed income securities. AM Best expects internal capital generation, with full retention of earnings, to support modest business growth and prospective risk-adjusted capitalisation. As a mutual company, MGEN does not have access to equity markets, which limits its financial flexibility.
In line with its mutual ethos, MGEN operates for the benefit of its members and prices its business accordingly. Consequently, earnings have been modest, with profit before tax ranging between EUR -20 million and EUR 55 million over the period 2013 to 2017. Results have been driven largely by investment income, and technical performance has been relatively weak, as evidenced by a five-year (2013-2017) average combined ratio of 102%. In order to adapt to increasing medical costs in France and the ongoing low interest rate environment, MGEN has increased its focus on underwriting discipline over recent years, which AM Best expects will have a positive impact on prospective technical earnings.
MGEN’s neutral business profile assessment takes into account its leading market position in the French health insurance segment, where it targets a niche clientele of teachers and other civil servants. The company’s profile benefits from strong brand recognition, broad distribution reach and solid ties with its affinity groups, which together contribute to high levels of member retention. However, with over 90% of its total business stemming from domestic supplementary health covers, MGEN is exposed directly to potential adverse developments in France’s social protection market. Whilst the business mix is not forecast to change significantly over the medium term, the mutual has engaged in a number of initiatives over recent years in an effort to reduce the concentration of its underwriting portfolio, including expanding its geographic footprint and developing new value-added products and services with the help of strategic partners.
AM Best notes the creation in 2017 of Groupe VYV (VYV), the largest mutual social protection group in France, of which MGEN is a significant member. Over the medium term, VYV could be a source of synergy gains for MGEN, which, in turn, could strengthen MGEN’s credit fundamentals.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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