AMSTERDAM–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of S2C S.p.A. Compagnia di Assicurazioni di Crediti e Cauzioni (S2C) (Italy). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect S2C’s balance sheet strength, which AM Best categorises as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
S2C’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is categorised as very strong, and AM Best expects it to remain at least at this level over the medium term. Offsetting factors in the balance sheet strength assessment include the company’s limited financial flexibility, its material, albeit reduced, exposure to Italian government bonds and its small capital base, which increases the potential for volatility in risk-adjusted capitalisation. Dependence on reinsurance is high, although the associated credit risk is mitigated partially by the company’s long-standing relationships with reinsurers of excellent credit quality.
S2C has a track record of good operating profits, driven by its robust underwriting performance that is demonstrated by a five-year average weighted combined ratio of 74% (2015-2019). In 2019, the combined ratio decreased to 77% (2018: 81%) due to a reduction in the operating expenses ratio that was driven by an increase in earned premiums. The company’s underwriting performance remained at a good level during the first nine months of 2020 despite the COVID-19 pandemic. Although overall results since 2012 have been good, AM Best notes that prospective performance may be volatile due to movements in the supplementary unearned premium reserve (required by local regulation) and the potential for fluctuations in loss experience from the company’s surety business.
S2C is a niche mono-line insurer that focuses on the highly competitive surety market in Italy. The company leverages its specialist expertise to compete against larger players and maintains sustainable premium rates. S2C has a developed ERM framework, with clear risk appetite and tolerance levels in place.
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