Regulatory Filings • Jun 29, 2023
Regulatory Filings
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Research Update:
June 29, 2023
On June 29, S&P Global Ratings revised its outlook on Gjensidige to stable from positive, and affirmed its 'A' long-term issuer credit and financial strength ratings on the group.
We also affirmed our 'BBB+' long-term issue credit ratings on Gjensidige's Tier 2 debt issues and our 'BBB' long-term rating on its Restricted Tier 1 subordinated issues.
We affirmed our issuer credit and financial strength ratings on Gjensidige at 'A' on our expectation that the group will continue to record robust underwriting results and maintain an excess of capital above the 'A' threshold in our capital model.
Gjensidige recorded another strong underwriting year in 2022 with a combined ratio of 81.4%. Investment losses of Norwegian krone (NOK) 651 million, largely stemming from unrealized losses on the group's bond portfolio, limited its net income to NOK4.5 billion, but its capital position remained above our 'AA' benchmark as per our capital model. Gjensidige's strong performance continued in first-quarter 2023, with a combined ratio of 86.9% and a pre-tax profit of NOK1.5
London + 44 20 7176 7095 robert.greensted @spglobal.com
Mark D Nicholson London + 44 20 7176 7991 mark.nicholson @spglobal.com
billion, despite some weather-related losses. Our expectation is that the group will continue to record underwriting results in the top quartile of its European peers with combined rations well below 90%.
We revised our outlook to stable from positive because we expect that management will seek to maintain flexibility and thus not commit to holding capital beyond its targeted 'A' level over the next two to three years. While the group held an excess at the 'AA' level at year-end 2022, management only commits to holding levels of capital commensurate with the 'A' benchmark in our capital model.
The stable outlook reflects our expectation that over the next two years, Gjensidige will continue to record robust underwriting results with combined ratios below 90%, at least at the same time as holding levels of capital above the 'A' threshold in our capital model.
Although unlikely, we could take a negative rating action on the group over the next 24 months if capitalization declined on a prolonged basis below the 'A' threshold in on our capital model. This could result from significant investment losses or sustained poor underwriting performance.
We could take a positive rating action on the group if it continued at its current level of underwriting performance with combined ratios close to 85%, and we expected management to consistently maintain a clear buffer above our 'AA' benchmark as per our capital model.
| Business risk profile | Strong |
|---|---|
| Competitive position | Strong |
| IICRA | Low risk |
| Financial risk profile | Very strong |
| Capital and earnings | Very strong |
| Risk exposure | Moderately low |
| Funding structure | Neutral |
| Anchor* | a |
| Modifiers | |
| Governance | Neutral |
| Liquidity | Exceptional |
| Comparable ratings analysis | 0 |
| Business risk profile | Strong |
|---|---|
| Competitive position | Strong |
| IICRA | Low risk |
| Financial risk profile | Very strong |
| Capital and earnings | Very strong |
| Risk exposure | Moderately low |
| Funding structure | Neutral |
| Anchor* | a |
| Modifiers | |
| Financial strength rating | A |
*This is influenced by our view of Gjensidige's relatively narrow competitive position
| Ratings Affirmed | ||
|---|---|---|
| Gjensidige | ||
| Junior Subordinated | BBB | |
| Junior Subordinated | BBB+ | |
| Ratings Affirmed;Outlook Action | ||
| To | From | |
| Gjensidige | ||
| Issuer Credit Rating |
| Local Currency | A/Stable/-- | A/Positive/-- |
|---|---|---|
| Financial Strength Rating | ||
| Local Currency | A/Stable/-- | A/Positive/-- |
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.standardandpoors.com for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at
https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352 Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; or Stockholm (46) 8-440-5914
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