COMPAGNIE BELGE D ASSURANCES AVIATION S.A. (AVIABEL)

Transcription

1 COMPAGNIE BELGE D ASSURANCES AVIATION S.A. (AVIABEL) 1050 Brussels, Belgium A- Operating Company Non-Life Ultimate Parent: Cie Belge d Assur Aviation SA (Aviabel) COMPAGNIE BELGE D ASSURANCES AVIATION S.A. (AVIABEL) Avenue Louise 54, 1050 Brussels, Belgium Web: Tel.: Fax: AMB#: AIIN#: AA Ultimate Parent#: BEST S CREDIT RATING Best s Financial Strength Rating: A- Outlook: Stable Best s Financial Size Category: VIII RATING RATIONALE Rating Rationale: The ratings of Compagnie Belge d Assurances Aviation (Aviabel) reflect the company s excellent risk-adjusted capitalisation, strong operating performance and excellent business profile, particularly within its home market (Benelux) and increasingly internationally. Aviabel has an excellent level of risk-adjusted capitalisation, boosted by strong operating profits in recent years. Whilst acknowledging that large claims or substantial investment losses could have a significant impact on future operating performance, A.M. Best expects risk-adjusted capitalisation to remain supportive of the ratings. Aviabel has a strong underwriting record with a five-year ( ) average combined ratio likely to be around 90%, in spite of higher expense ratios in more recent years. The higher expense ratios reflect increased staffing costs, mainly to meet the demands of Solvency II, set against a reduced level of net written premiums. Although overcapacity and generally 2015 A.M. Best Company, Oldwick, NJ Printed May 28, Page 1 of 6

2 good loss experience continue to drive down aviation premium rates, Aviabel is expected to report a good profit for 2014, on a similar scale to recent years. The technical profit is likely to have been supported by an excellent level of investment income. Aviabel has a strong business profile as the leading aviation underwriter in the Benelux countries, with approximately 80% of the general aviation market, although business from these home markets accounted for only 22% of gross premiums in Aviabel s target markets of France, Spain, Portugal, Turkey and leading lines in UK general aviation contributed a further 21%. The balance of 57% was derived from worldwide markets. If Aviabel continues to manage its business successfully through the current particularly challenging phase of the global aviation insurance cycle, there could be positive pressure on the ratings in the medium term. However, unexpectedly poor operating results or a material decrease in Aviabel s risk-adjusted capitalisation could put negative pressure on the ratings. FIVE YEAR RATING HISTORY Best s Date FSR 04/01/15 A- CORPORATE OVERVIEW Compagnie Belge d Assurances Aviation SA (Aviabel) was established in 1935 by a group of fourteen Belgian insurance and reinsurance companies to take advantage of the development of commercial and private aviation but keep aviation risks in a specialist insurance company. The current shareholders are fewer in number but still Belgian companies, except that in 2010 QBE Re Europe acquired the Belgian reinsurer, Secura NV, and so obtained its 19% shareholding in Aviabel. After the Second World War, during which the company s activity was minimal, there was a renaissance in civil aviation and Aviabel became the leading insurer in the Belgian aviation market. At the same time, the company developed a reinsurance book of business in the international market. In 1997, through the free movement of services, Aviabel became the leading insurer in the Luxembourg aviation market. In 2001 it acquired the general aviation portfolio of the Nederlandse Luchtvaart Pool and established a branch in Amsterdam. Aviabel has a wholly owned subsidiary, Aviabel RE, established in 1994 in Luxembourg, which provides reinsurance solely for Aviabel, principally on an excess of loss basis. CORPORATE STRUCTURE AMB# COMPANY NAME DOMICILE % OWN Cie Belge Assur Aviation SA Belgium Aviabel Re Luxembourg BUSINESS PROFILE Having been established by Belgian companies in Belgium as a specialist insurance company writing aviation risks, Aviabel has an excellent business profile in its home market of Belgium, Luxembourg, through the free movement of services since 1997, and the Netherlands, following the acquisition in 2001 of the Nederlandse Luchtvaart Pool and the establishment of a branch in Amsterdam. Aviabel has a share of 80% of the general aviation market in these countries but this business accounted for only 22% of the group s gross premiums in Aviabel s target markets of France, Spain, Portugal, Turkey and leading lines in UK general aviation contributed a further 21%. The balance of 57% was derived from worldwide markets. Aviabel has defined its strategy for each of these market categories. In its home markets the focus is on retention of business and in the target and worldwide markets the focus is on development. The target markets are European markets that Aviabel has identified as fitting its business model and criteria; other European countries, where Aviabel could expand through EU freedom of services, are included within the strategy for the worldwide market. This area also encompasses Aviabel s reinsurance business and the development strategy includes facultative arrangements with selected brokers in Latin America and Asia and quota share treaty partnerships in Mexico, Asia, Scandinavia and Canada. Aviabel s main lines of business consist of general aviation, airlines, products and manufacturers, airports, pilots loss of licence and treaty reinsurance. With regard to airlines, manufacturers and airports, Aviabel focuses on smaller operators as the company does not wish to take on the high exposures of the major players, such as national airlines and Airbus or Boeing, and tends to take a following line. Overall, however, the company leads nearly 40% of its business. The aviation market as a whole has been challenging for many years, with overcapacity continually driving down premium rates. These soft market conditions are particularly challenging for a niche player such as Aviabel. The company s business model is to compete on service in particular, while remaining competitive as far as possible on price, with a focus on the selection and retention of good business. Aviabel is a founder member of the International Union of Aerospace Insurers (IUAI). RISK MANAGEMENT In recent years, Aviabel has made considerable progress in developing a robust risk management framework, especially in the context of the company s preparations for Solvency II. The risk management framework now in place appears appropriate for the company s risk exposure and has been approved by the Belgian regulator, the National Bank of Belgium. Aviabel s risk management framework follows a standard approach and process, with the board of directors involved through the Audit, Risk and Remuneration committee and a risk management team reporting to the Executive Committee. The risk management process is integrated with the Solvency II framework, following the three pillar approach, and combines quantitative and qualitative assessments of risk. The quantitative assessment uses actuarial software to model data from Aviabel s data warehouse and other 2015 A.M. Best Company, Oldwick, NJ Printed May 28, Page 2 of 6

3 sources. For the qualitative assessment Aviabel has a risk management system to help with identification, assessment and control of all risks in its risk register. Aviabel is developing an internal model for catastrophe risk but intends to use the standard formula for Solvency II (Pillar 1) purposes. OPERATING PERFORMANCE Operating Results: Aviabel has a strong underwriting record with a 5 year ( ) average combined ratio likely to be around 90%, in spite of higher expense ratios in more recent years. The higher expense ratios reflect increased staffing costs, mainly to meet the demands of Solvency II, set against a reduced level of net written premiums in the continuing soft market conditions. In recent years investment earnings have shown some volatility, with a particularly strong return of 8.4% in 2012, driven by unrealised investment gains. Aviabel s investment strategy has a risk appetite for the portfolio of 10% equities. A good profit is expected to be reported for 2014, on a similar scale to recent years. The technical profit is likely to have been supported by an excellent level of investment income. Underwriting Results: Aviabel has achieved underwriting profits for several years, although in 2013 the underwriting result was reduced to EUR 2.6 million by two large losses in Belgium. A lower underwriting profit is expected to be reported for 2014 after a series of major losses in that year, including the July 2014 Transasia Airways crash in southern Taiwan and the December Air Asia crash in the Java Sea. The net combined ratio is likely to be close to 98% (2013: 95%). Investment Results: Aviabel s exposure to equities and equity based funds amounted to 10.3% of total investments and cash at year-end 2013 and 10.7% in September The investment portfolio is currently subject to a strategic target asset allocation of a minimum 10% cash and 25% government bonds, indicating a risk appetite for 10% equities and 50% corporate bonds, with the balance in property. The company owns an apartment building, which is due to be sold, but otherwise invests in property funds. The overall net investment return for the year to December 2013 was 3.4%, as compared with 8.4% for 2012, the difference driven by realised and unrealised capital gains of EUR 2.4 million in 2013 after EUR 10.8 million in A good investment return in excess of 5% is expected to be reported for substantial investment losses could have a significant impact on future operating performance, A.M. Best expects risk-adjusted capitalisation to remain supportive of the ratings. Loss Reserves: Aviabel s outstanding claims reserves are initially set on a case by case basis by the claims department. The IBNR reserves for each main line of business are calculated on a prudent basis by the internal actuary using chain ladder and other actuarial techniques and then reviewed by an external actuary. At year-end 2013, Aviabel s IBNR reserves were substantially higher than the external actuary s net estimate, giving a 9% margin over the actuary s best estimate of total net reserves. The case by case review identifies reserve releases for a number of losses but also results in reserve strengthening in other cases. Additionally, at year-end 2013, a general strengthening of reserves for asbestos-related claims was made amounting to EUR 1 million. Liquidity: A.M. Best expects Aviabel to maintain good liquidity into All investments are readily realisable, with Government bonds and A rated corporate bonds representing the majority of the fixed income portfolio. There is no material exposure to peripheral European sovereign bonds or banks. Average duration is approximately 3.5 years. Summarized Accounts as of December 31, 2013 Data reflected within all tables of this report has been compiled from the financial statements of this company (Source: Company Financial Statement). An independent audit of the company s affairs through December 31, 2013, was conducted by BDO Reviseurs d entreprises. BALANCE SHEET STRENGTH Capitalization: Aviabel is expected to maintain excellent risk-adjusted capitalisation in 2015 and into Whilst recognising that large claims and 2015 A.M. Best Company, Oldwick, NJ Printed May 28, Page 3 of 6

4 US $ per Local Currency Unit = 1 Euro (EUR) STATEMENT OF INCOME 12/31/ /31/2013 EUR(000) USD(000) Net claims paid 26,726 36,796 Net increase/(decrease) in claims provision Net claims incurred 26,401 36,349 Management expenses 1,933 2,661 Acquisition expenses 11,498 15,830 Net operating expenses 13,431 18,492 Other technical expenses -1,229-1,692 Total underwriting expenses 38,603 53,148 Balance on combined technical account 6,551 9,019 12/31/ /31/2013 EUR(000) USD(000) Non-technical account: Net investment income 1,201 1,654 Realised capital gains/(losses) Unrealised capital gains/(losses) Technical account: Direct premiums 26,276 36,177 Other income/(expense) Reinsurance premiums assumed 24,419 33,620 Profit/(loss) before tax 7,388 10,172 Gross premiums written 50,695 69,796 Taxation Reinsurance ceded 6,651 9, Net premiums written 44,044 60,639 Profit/(loss) after tax 6,713 9,242 Increase/(decrease) in gross unearned premiums -1,141-1,571 Reinsurers share unearned premiums Dividend to shareholders 3,401 4,682 Increase/(decrease) in the equalisation provision 2,886 3,973 Net premiums earned 45,154 62,168 Exceptional income/(expense) Total underwriting income 45,154 62,168 Retained profit/(loss) brought forward Net claims paid 26,726 36,796 Retained profit/(loss) carried forward Net increase/(decrease) in claims provision Net claims incurred 26,401 36,349 ASSETS 12/31/ /31/ /31/2013 Management expenses 1,933 2,661 EUR(000) % of total USD(000) Acquisition expenses 11,498 15,830 Cash & deposits with credit institutions 6, ,247 Net operating expenses 13,431 18,492 Bonds & other fixed interest securities 77, ,205 Other technical expenses -1,229-1,692 Shares & other variable interest instruments 16, ,388 Total underwriting expenses 38,603 53,148 Liquid assets 100, ,840 Balance on technical account 6,551 9,019 Mortgages & loans Combined technical account: Real estate 2, ,856 Direct premiums 26,276 36,177 Reinsurance premiums assumed 24,419 33,620 Inter-company investments 3, ,163 Gross premiums written 50,695 69,796 Total investments 107, ,907 Reinsurance ceded 6,651 9,157 Net premiums written 44,044 60,639 Reins. sh. of tech. reserves - unearned premiums Increase/(decrease) in gross unearned premiums -1,141-1,571 Reinsurers share of technical reserves - claims 18, ,024 Increase/(decrease) in reinsurers share unearned premiums Net premiums earned 45,154 62,168 Total reinsurers share of technical reserves 19, ,251 Total revenue 45,154 62,168 Insurance/reinsurance debtors 11, ,873 Inter-company debtors Other debtors Total debtors 12, ,228 Fixed assets Prepayments & accrued income ,289 Other assets ,225 Total assets 141, , A.M. Best Company, Oldwick, NJ Printed May 28, Page 4 of 6

5 LIABILITIES 12/31/2013 EUR(000) 12/31/2013 % of total 12/31/2013 USD(000) Capital 13, ,898 Paid-up capital 13, ,898 Non-distributable reserves 1, ,794 Distributable reserves 21, ,285 Claims equalisation reserve 21, ,372 Other reserves 1, ,409 Retained earnings Capital & surplus 59, ,160 Gross provision for unearned premiums 6, ,074 Gross provision for outstanding claims 59, ,310 Total gross technical reserves 66, ,384 Deposits received from reinsurers 5, ,845 Insurance/reinsurance creditors 3, ,508 Inter-company creditors Other creditors 5, ,800 Total creditors 9, ,790 Accruals & deferred income Other liabilities Total liabilities & surplus 141, ,224 MANAGEMENT Officers: Chief Executive Officer, Cécile Coune (President of the Executive Committee); Chief Financial Officer and Chief Risk Officer, Thierry Bourguignon (Member of the Executive Committee); Chief Underwriting Officer, Filip Vandeputte (Member of the Executive Committee). Directors: Pierre Anciaux, Thierry Bourguignon, Eric Van Cappellen, Francis Colaris, Cécile Coune, Hans De Cuyper, Jan Leflot (Vice Chairman), Bruno Moors, Anne-Marie Roumieux, Filip Vandeputte, Benoit Verwilghen (Chairman). ANALYSIS OF GROSS PREMIUMS WRITTEN EUR EUR EUR EUR EUR (000) (000) (000) (000) (000) Accident & health 1,016 1,162 1,247 2,201 4,484 Liability 1,523 1,432 1,761 1,344 Marine, aviation & trans 22,374 22,451 20,922 16,974 18,047 Pecuniary loss 1,363 2,327 3,213 1,445 Reinsurance 24,419 25,706 29,345 37,223 25,263 Total non-life 50,695 53,078 56,488 59,187 47,794 REINSURANCE Aviabel s aviation hull and liability reinsurance combines excess of loss and stop loss arrangements with its own captive, Aviabel RE, with further layers of excess of loss cover provided by the global reinsurance market. At group level, however, the cover provided by the captive contributes to higher levels of loss retention. Aviation hull war risks are 100% reinsured with leading European reinsurers while AVN52 (extended liability coverage) risks have excess of loss cover in excess of EUR 1.1 million. Loss of licence business is 40% ceded to Lloyd s. The reinsurance panel used for the group s programme consists of reinsurers with a rating of A- or above. Aviabel s risk portfolio has minimal exposure to natural catastrophes. For risk analysis, the company models loss events based on various stress test scenarios, such as two insured aircraft colliding on approach to Antwerp airport or a number of insured aircraft destroyed in a hangar fire. BALANCE SHEET ITEMS EUR EUR EUR EUR EUR (000) (000) (000) (000) (000) Liquid assets 100, , ,772 94,900 86,097 Total investments 107, , , ,755 93,108 Total assets 141, , , , ,106 Unreal gain/(loss) - investments 17,841 17,460 8,326 10,615 9,830 Total gross technical reserves 66,375 65,046 63,695 56,631 50,365 Net technical reserves 47,308 49,641 47,652 37,341 27,840 Total liabilities 81,395 84,037 82,062 77,136 68,411 Capital & surplus 59,675 57,030 57,651 57,230 56,695 INCOME STATEMENT ITEMS EUR EUR EUR EUR EUR (000) (000) (000) (000) (000) Gross premiums written 50,695 53,078 56,488 59,187 47,794 Net premiums written 44,044 45,052 48,362 43,566 25,224 Balance on technical account(s) 6,551 3,238 2,200 1,496 2,716 Profit/(loss) before tax 7,388 5,496 5,081 6,206 5,832 Profit/(loss) after tax 6,713 4,207 4,147 4,628 5, A.M. Best Company, Oldwick, NJ Printed May 28, Page 5 of 6

6 LIQUIDITY RATIOS (%) Total debtors to total assets Liquid assets to net technical reserves Liquid assets to total liabilities Total investments to total liabilities LEVERAGE RATIOS (%) Net premiums written to capital & surplus Net technical reserves to capital & surplus Gross premiums written to capital & surplus Gross technical reserves to capital & surplus Total debtors to capital & surplus Total liabilities to capital & surplus PROFITABILITY RATIOS (%) Loss ratio Operating expense ratio Combined ratio Other technical expense or (income) ratio Net investment income ratio Operating ratio Return on net premiums written Return on total assets Return on capital & surplus Why is this Best s Rating Report important to you? A Best s Rating Report from the A.M. Best Company showcases the opinion from the leading provider of insurer ratings of a company s financial strength and ability to meet its obligations to policyholders, as well as its relative credit risk. The A.M. Best Company is the oldest, most experienced rating agency in the world and has been reporting on the financial condition of the insurance companies since A Best s Financial Strength Rating is an independent opinion of an insurer s financial strength and ability to meet its ongoing insurance policy and contract obligations. The Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance policy and contract obligations. The rating is not assigned to specific insurance policies or contracts and does not address any other risk, including, but not limited to, an insurer s claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. The rating is not a recommendation to purchase, hold or terminate any insurance policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or other information provided to it. While this information is believed to be reliable, A.M. Best does not independently verify the accuracy or reliability of the information. The company information appearing in this pamphlet is an extract from the complete company report prepared by the A.M. Best Company or A.M. Best Europe Rating Services Limited. For the latest Best s Financial Strength Ratings along with their definitions and A.M. Best s Terms of Use, visit the A.M. Best website at You may also obtain AMB Credit Reports by visiting our site or calling our Customer Service department at , ext To expedite your request, please provide the company s identification number (AMB#) A.M. Best Company, Oldwick, NJ Printed May 28, Page 6 of 6