OREANDA-NEWS. Fitch Ratings has affirmed France-based Prevoir Vie's and Prevoir Risques Divers' Insurer Financial Strength (IFS) ratings at 'A'. The agency has also affirmed Societe Centrale Prevoir's (the group's holding company) Long-term Issuer Default Rating (IDR) at 'A-'. The Outlooks are Stable.

KEY RATING DRIVERS
The ratings of all three entities (together, the group) reflect their solid capital adequacy and resilient earnings generation. Offsetting factors include their high exposure to equities and speculative-grade bonds, limited size, the lack of geographical diversification, and moderate exposure to interest rate risk.

Fitch assesses Prevoir Vie's and Prevoir Risques Divers' capital adequacy as 'extremely strong', as measured by the Prism Factor-Based Model (Prism FBM) score at end-2015. The group also has very strong regulatory solvency ratios. At end-2014, the group's Solvency II margin was 3.6x its solvency capital requirements. The calculation was based on the Standard Formula, including transitional measures on equity risk. Fitch believes that the group's Solvency II position will have remained similarly strong at end-2015. Financial leverage is very low, as the group has only limited bank borrowings.

In 2015, the group's percentage of common equities to equity was high at 109% (2014: 107%). In addition, speculative-grade bonds accounted for 69% of equity. As a result, the Fitch-calculated ratio of high-risk assets-to-equity was 178% (2014: 179%), which is significantly outside the 'A' category median. However, this high investment risk is mitigated by the group's solid capital position.

The group's solid and stable profitability was underlined by a net result of EUR44m in 2015 (2014: EUR43m). Pre-tax operating return on assets is stable and was 1.3% on average over 2011-2015; return on equity was strong at around 8% on average over the same period.

For Prevoir Vie, the duration gap between assets and liabilities is around five years. This can be explained by the group's choice to maintain shorter and comparably more liquid assets than liabilities. However, the duration gap is lower when real estate assets (13% of invested assets) are included in the calculation, which reduces sensitivity to interest rate risk. In addition, the average guaranteed interest rate fell in 2015 to 1.3%, a level that Fitch views as manageable (2014: 1.8%, 2013: 1.9%).

The group offers tailored products and customer service to specific customer groups and segments, including predominantly self-employed workers. Its core business focuses on death and sickness protection for individuals and families on low and middle incomes. Its consolidated gross written premiums (GWP) increased 3% in 2015 to EUR546m, slightly below the 5% achieved by the French life insurance market.

RATING SENSITIVITIES
The ratings could be downgraded if the Prism FBM score falls to below "Very Strong" and is not expected to recover in the medium term, or if the high-risk assets-to-equity ratio rises above 200%. Failure to maintain strong profitability, as reflected, for example, in net profit falling below EUR20m, could also result in a downgrade.

An upgrade is unlikely in the medium term given the concentration of its operations on the French market and small size. However, over the longer term, material growth in market share along with strong financial performance and solid capital adequacy could result in an upgrade.

FULL LIST OF RATING ACTIONS

Societe Centrale Prevoir
-Long-Term IDR: affirmed at 'A-'; Outlook Stable

Prevoir Vie
-Insurer Financial Strength: affirmed at 'A'; Outlook Stable

Prevoir Risques Divers
-Insurer Financial Strength: affirmed at 'A' ; Outlook Stable