AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Société Hospitalière d’Assurances Mutuelles (Sham) (France). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Sham’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Sham’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Sham’s risk-adjusted capitalisation to remain at the strongest level through the medium term. The company benefits from a liquid investment portfolio composed of high quality assets and a history of prudent reserving. Offsetting factors in the assessment include a high dependence on reinsurance, with the company ceding more than 60% of its gross written premium in 2019. Sham’s longstanding relationship with its reinsurance panel of high quality somewhat mitigate the risks associated with this dependence.
Sham’s adequate operating performance assessment is supported by an average non-life combined ratio of 104.1% for the five-year period ending in 2019. In 2019, the group reported a net loss of EUR 5.7 million (2018: EUR 16.0 million profit). The loss was driven by reserve strengthening in the French market, which was tied to regulatory reform. The effects of this reform were offset partially by strong technical performance in international markets, and by positive non-technical performance. In recent years, Sham has expanded outside of France, with growth focused on Italy and Spain. While initial experience in the company’s international operations has been good, AM Best notes that the ultimate profitability of this business will not be clear for some time due to the long-tailed nature of medical professional liability insurance (MPLI).
Sham’s neutral business profile assessment is supported by its established position in the French MPLI market, where its market share is above 50%. Since 2016, the group has also developed significant positions in Spain and Italy’s MPLI markets, rebranding as Relyens in 2018 to reflect its more international profile. Spanish and Italian business accounted for 44% of the group’s gross earned premium in 2019. The group expects to build on existing relationships with its member base with the long-term goal of providing comprehensive risk management services, which may lead to new revenue sources. Sham has identified how disruptions in the health care industry could impact its business model and is actively investing to benefit from these trends.
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