Earnings Release • Jun 25, 2021
Earnings Release
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June 25, 2021
On June 25, 2021, S&P Global Ratings revised the outlook to positive from stable on Gjensidige Forsikring ASA (Gjensidige). At the same time, we affirmed our 'A' long-term issuer credit and financial strength ratings on Gjensidige. We also affirmed our 'BBB+' issue rating on Gjensidige's tier 2 debt and our 'BBB' issue rating on its restricted tier 1 subordinated debt.
The positive outlook on Gjensidige reflects the insurer's strengthening capital position. We also expect that Gjensidige will continue to produce strong technical results and that its exposure to investment risk will remain the same.
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Stockholm + 46 8 440 5921 andreas.lundgren.harell @spglobal.com
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We could raise the ratings over the next 12-24 months if Gjensidige's:
We could revise our outlook to stable should Gjensidige suffer significant business volatility, or should claims or investment losses impair Gjensidige's capital base.
Gjensidige strengthened its capital base materially over 2020-2021, partly through strong retained earnings, with profit before tax of Norwegian krone (NOK) 6.3 billion in 2020 and NOK1.6 billion in the first quarter of 2021. Gjensidige also raised NOK2.4 billion of fresh capital through two hybrid issues in March 2021. As well as reinforcing capital as measured by our capital model, coverage of the Solvency II capital requirement rose to 215% by March 2021. Gjensidige has long delivered strong and consistent technical profitability, with combined ratios under 86% for each of the past five years. Coupled with conservative reserving, this gives us confidence that Gjensidige will maintain this enhanced capital strength.
We base our ratings on Gjensidige on its longstanding strong competitive position in the Norwegian property/casualty insurance market. In Norway, Gjensidige's brand and reputation underpin its leading market share and sustainably strong earnings throughout cycles. Additionally, Gjensidige is growing its business in Denmark, Sweden, and the Baltic countries. The ratings also reflect Gjensidige's healthy capitalization and its advanced risk controls. Its controls mitigate the risk of higher volatility in investments, as demonstrated in 2020. We view Gjensidige's majority ownership by the Gjensidige foundation as a positive for the rating and a potential source of financial flexibility, should this be required.
| To | From | |
|---|---|---|
| Business risk profile | Strong | Strong |
| Competitive position | Strong | Strong |
| IICRA | Low risk | Low risk |
| Financial risk profile | Very strong | Strong |
| Capital and earnings | Very strong | Strong |
| Risk exposure | Moderately low | Moderately low |
| Funding structure | Neutral | Neutral |
| To | From | |
|---|---|---|
| Anchor* | a | a |
| Modifiers | ||
| Governance | Neutral | Neutral |
| Liquidity | Exceptional | Exceptional |
| Comparable ratings analysis | 0 | 0 |
| Financial strength rating | A | 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 | A/Positive/-- | A/Stable/-- | ||
| Financial Strength Rating | A/Positive/-- | A/Stable/-- |
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; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.
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