Credit profiles and rating migration of insurance industry
1. Credit profiles and rating
migration of Insurance
industry in Europe
(Under the Guidance of R.P.D. Sir)
3. Credit Rating
A credit rating is an assessment of an
entity’s ability to pay its financial
obligations. the ability to pay financial
obligations is referred to as
Credit ratings apply to debt securities
like bonds, notes, and other debt
instruments (such as certain asset-backed
securities) and do not apply to
equity securities like common stock.
Credit ratings also are assigned to
companies and governments.
4. A credit rating is an
assessment of the
creditworthiness of a debt
instrument or obligor,
based on a credit rating
agency’s analytical models,
historical financial and
operating experience and
collateral performance may
factor into the analysis of
an obligor, credit ratings
are simply a prediction of
how an obligor may
behave in the future.
5. Credit Rating Agencies
A credit rating agency is an entity which
assesses the ability and willingness of
the issuer company for timely payment
of interest and principal on a debt
6. What is insurance?
Insurance of any type is all about managing risk.
For example, in life insurance, the insurance
company attempts to manage mortality (death)
rates among its clients.
It facilitates economic transactions by providing
risk transfer and indemnification. It encourages
risk management and the promotion of safe
practices. It promotes financial stability by
providing long-term investment in the economy.
7. Insurance makes a
major contribution to
economic growth and
It encourages stable
savings and pension
8. Insurance Industry in
With a 33% share of the global market, the European insurance
industry is the largest in the world, followed by North America
(30%) and Asia (29%).
The insurance sector has the largest pool of investment funds in
the European Union, with almost €8 400bn invested in the
global economy in 2012. This is equal to 58% of the GDP of the
The European insurance sector is a significant employer, both in
terms of direct and indirect employment.
9. • Distribution structures across EU markets are diverse, adapted
to consumers’ needs and constantly evolving.
• The European insurance industry faced a rather challenging
environment in 2011. A number of factors, such as the sluggish
economy, low interest rates and a continuing need for
expenditure reduction, appeared to affect insurers and more
particularly life insurers.
10. In 2011 the number of companies in the 32 countries that are full members of Insurance Europe fell by
almost 3% to slightly fewer than 5 500. This decrease is mainly explained by a drop of nearly 8% in the UK,
which — with about 1 200 insurance companies in 2011 — is the largest market in terms of insurer
In 2010 employment in the European insurance industry remained relatively stable at around 960 000
people after a 5%drop reported in 2009.
Available data for 2010 indicate that more than 86% of European employees work full-time, although this
proportion has been decreasing slowly over the last 10 years (from 89%in 2001).
14. Three sub-factors are included within the ‘Operation Environment’ which group
the key elements that determine the economic, legal and regulatory
environment where an Insurance company sets and develops its business
Corporate Governance is an important factor in determining the quality of
management, the fulfilment and predictability of the strategic plan and long-term
performance. It therefore affects the long-term financial stability and
sustainability of any Insurance company.
Sustainability and Competition factors are tools that any company should
develop to successfully position itself within the competitive environment and
implement a successful business strategy. The ability of an Insurance
company to scale its operation with a healthy grow to gain a stable market
share, provides a basis for long-term earnings, competitiveness and therefore
15. • Insurance companies with a proven ability and expertise to
successfully manage underwriting and investment risks are
likely to maintain their long-term individual financial
sustainability. An Insurance company’s ability to generate
operating profits under a solid risk management framework in
terms of underwriting policies, investment strategy and product
risk management is analysed and challenged, based on the
operation environment and diversification strategy.
• The last component of the IFSA is focused solely on financial
analysis, and for the case of Insurance companies includes a
detailed view on Capital, Reserves, Liquidity and Profitability.
This analysis provides a set of ratios to assess the financial
soundness of Insurance companies, both Life and Non-Life, which
is then used also for peer comparison.
16. External Support Assessment
External Support Assessment (ESA) is combined with the IFSA to
determine the final Credit Rating. The ESA is on the likelihood of
support from an identified ‘External Support Provider’. The support
providers identified are:
1. Parent / Holding Company
2. National Systemic
After the identification of the ‘External Support Providers’, the ‘Level
of Support’ that would eventually be obtained is assessed.
17. Through a set scoring system one of the four levels of
support listed below is identified:
4. Very High
19. • In Europe, AXA operates in the life insurance,
property-casualty, asset management, assistance,
international insurance markets and retail banking.
• AXA Group, a worldwide leader in financial
services, operates in 56 Countries with over
157,000 employees and 102 million customers.
• AXA in the UK:
Has around 13 million customers
Employs approximately 10,500 people
Has been ranked 22nd in The Sunday Times Top 25
Best Big Companies to work for Survey 2014
Has been awarded the 'Positive about Disabled
People' symbol from the Department of
21. • Zurich operates globally and locally, according to the customers’
needs. It delivers insurance products and services in more than 170
• Founded in Switzerland in 1872, Zurich is one of the world’s most
experienced insurers. Customers choose Zurich to protect the
people and things they love because they value Zurich’s
knowledge, expertise and stability.
• Zurich has three core business segments – General Insurance,
Global Life, and Farmers.
22. Prudential Group
• Prudential plc is an international financial services group with significant operations
in Asia, the US and the UK.
• It serves more than 23 million customers and have £443 billion of assets under
management. It is listed on stock exchanges in London, Hong Kong, Singapore and
• The Group is structured around four main business units: Prudential Corporation Asia,
Jackson National Life Insurance Company, Prudential UK and M&G.
• Prudential uses long-term thinking to create long-term value. Through the strong
financial performance and international strategy, it creates financial benefits for the
shareholders and investors and delivers economic and social benefits for the
communities in which it operates.
• In the UK, it is a leading life and pensions provider with approximately 7 million