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AM Best Withdraws Credit Ratings of Mutuelle Générale de l’Education Nationale

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LONDON–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A
(Excellent) and the Long-Term Issuer Credit Rating of “a” of Mutuelle
Générale de l’Education Nationale (MGEN) (France). The outlook of these
Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn
these ratings as the company has requested to no longer participate in
AM Best’s interactive rating process.

The ratings reflect MGEN’s balance sheet strength, which AM Best
categorises as strongest, as well as its adequate operating performance,
neutral business profile and appropriate enterprise risk management.

MGEN’s balance sheet strength is underpinned by its risk-adjusted
capitalisation, which is maintained at the strongest level, as measured
by Best’s Capital Adequacy Ratio (BCAR). Underwriting leverage is low,
and the investment portfolio is relatively conservative, primarily
comprising good quality fixed income securities. AM Best expects
internal capital generation, with full retention of earnings, to support
modest business growth and prospective risk-adjusted capitalisation. As
a mutual company, MGEN does not have access to equity markets, which
limits its financial flexibility.

In line with its mutual ethos, MGEN operates for the benefit of its
members and prices its business accordingly. Consequently, earnings have
been modest, with profit before tax ranging between EUR -20 million and
EUR 55 million over the period 2013 to 2017. Results have been driven
largely by investment income, and technical performance has been
relatively weak, as evidenced by a five-year (2013-2017) average
combined ratio of 102%. In order to adapt to increasing medical costs in
France and the ongoing low interest rate environment, MGEN has increased
its focus on underwriting discipline over recent years, which AM Best
expects will have a positive impact on prospective technical earnings.

MGEN’s neutral business profile assessment takes into account its
leading market position in the French health insurance segment, where it
targets a niche clientele of teachers and other civil servants. The
company’s profile benefits from strong brand recognition, broad
distribution reach and solid ties with its affinity groups, which
together contribute to high levels of member retention. However, with
over 90% of its total business stemming from domestic supplementary
health covers, MGEN is exposed directly to potential adverse
developments in France’s social protection market. Whilst the business
mix is not forecast to change significantly over the medium term, the
mutual has engaged in a number of initiatives over recent years in an
effort to reduce the concentration of its underwriting portfolio,
including expanding its geographic footprint and developing new
value-added products and services with the help of strategic partners.

AM Best notes the creation in 2017 of Groupe VYV (VYV), the largest
mutual social protection group in France, of which MGEN is a significant
member. Over the medium term, VYV could be a source of synergy gains for
MGEN, which, in turn, could strengthen MGEN’s credit fundamentals.

This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best’s Credit Ratings
. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view
Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases
.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

Contacts

Charlotte Vigier
Senior Financial Analyst
+44
20 7397 0270

charlotte.vigier@ambest.com

Ghislain Le Cam, CFA, FRM
Director, Analytics
+44
20 7397 0268

ghislain.lecam@ambest.com

Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644

james.peavy@ambest.com

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