Regulatory Filings • Apr 30, 2024
Regulatory Filings
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Research Update:
April 30, 2024
On April 30, S&P Global Ratings affirmed its 'A' long-term issuer credit and financial strength ratings on Gjensidige Forsikring ASA. The outlook remains stable. We also affirmed our 'BBB+' issue ratings on Gjensidige's Tier 2 debt issues and the 'BBB' rating on its restricted Tier 1 subordinated issues.
London + 44 20 7176 7095 robert.greensted @spglobal.com
London + 44 20 7176 7301 ali.karakuyu @spglobal.com
| Key strengths | Key risks |
|---|---|
| Leading market position in the Norwegian property and casualty (P/C) market |
Higher-than-average investment risk appetite |
| Consistently strong underwriting performance | Limited product and geographic diversification compared with higher rated peers |
The stable outlook on Gjensidige reflects our view that the group will continue to report excellent underwriting results and maintain levels of capital in excess of our 99.95% benchmark over the next two years. We expect the group will demonstrate its strong competitive position through recording combined ratios below 90% and return on equity in excess of 15% over the same period.
We could take a negative rating action over the next 24 months if Gjensidige suffers significant underwriting or investment losses that drive its capital base consistently below our 99.8% benchmark.
We could take a positive rating action over the next 24 months if Gjensidige continues to record combined ratios below 90% while consistently maintaining capital levels at the 99.99% level.
Gjensidige is the leading P/C insurance provider in Norway, with a powerful brand and reputation evidenced by its very high retention rates (above 90%) in both private and commercial lines. While the majority of the group's income is sourced from nonlife products in Norway (67% of group revenue at year-end 2023), the group has some geographic diversification with sizable market shares in nonlife lines in Denmark (22% of group revenue) and Sweden (5%), as well as a presence in the Baltics (4%). Gjensidige is also active in the Norwegian pension and savings market (1% of group revenue). We do not expect Gjensidige to expand outside of its Scandinavian and Baltic focus over the next two years. While we expect its pensions and savings business to become a larger part of the group, we expect Gjensidige will remain an overwhelmingly nonlife focused insurer.
We expect that Gjensidige will continue to grow its top line over 2024-2025 but in a more moderated manner. The group has increased its gross premium by around 21% over the past two years in part due to rate increases driven by inflation. At the end of 2023, the group had grown insurance revenue by 9% with both strong renewals and volume growth. However, we would expect growth to temper over 2024-2025 as inflation reduces.
In 2023, Gjensidige again reported robust results, with profits before tax of Norwegian krone (NOK) 5.6 billion and a strong combined ratio of 87.6%. A higher frequency of claims in both personal and commercial lines driven by natural catastrophes had a negative impact on loss ratios. However, we expect Gjensidige's underwriting results will continue to compare very favorably with other 'A' rated peers such as Hiscox, Lansforsakringar, and Triglav.
Gjensidige's coverage of Solvency II capital requirements remained well within its target range at 166% at year-end 2023. Gjensidige continued to pay dividends in line with its strategy of a payout ratio of at least 80%. We expect the group to comfortably manage its Solvency ratio within management's target range of 140%-190% over 2024-2025. We expect that the group will also maintain capital levels at a comfortable margin above 99.8% in our risk-based model over the same period.
While Gjensidige is a public company, the Gjensidige Foundation retains majority ownership. The foundation aims to keep at least a 60% share of the group over time, though it could accept a temporarily reduced share should the need arise. We regard this facility as enhancing the financial flexibility of the group. Fixed charge coverage and leverage remained robust.
| Financial strength rating | A/Stable/-- |
|---|---|
| Anchor | a |
| Business risk | Strong |
| IICRA | Low risk |
| Competitive position | Strong |
| Financial risk | Very Strong |
| Capital and earnings | Very Strong |
| Risk exposure | Moderately low |
| Funding structure | Neutral |
| Modifiers | |
| Governance | Neutral |
| Liquidity | Exceptional |
| Comparable ratings analysis | 0 |
| Support | 0 |
| Group support | 0 |
| Government support | 0 |
We consider Gjensidige's capital position to be weaker under both our model and Solvency 2 than A+ peers. Gjensidige is also less diversified than many of its A+ peers. IICRA--Insurance Industry And Country Risk Assessment.
| Gjensidige | |
|---|---|
| Issuer Credit Rating | |
| Local Currency | A/Stable/-- |
| Financial Strength Rating | |
| Local Currency | A/Stable/-- |
| Subordinated | BBB+ |
| Junior Subordinated | BBB |
| Junior Subordinated | BBB+ |
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.spglobal.com/ratings for further information. Complete ratings information is available to RatingsDirect subscribers at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.spglobal.com/ratings.
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