According to Fitch, the upgrade reflects improvement in Euroins' capitalisation, combined with the agency’s expectation that financial performance and reserve adequacy will stabilise.
Euroins' rating continues to reflect its still weak capitalisation and poor reserve adequacy, which are partly offset by its strong franchise in the insurance market in Bulgaria, the agency said.
Fitch expects that Eurohold's BGN 175 million (EUR 89.5 million) capital injection into Euroins in December 2024, which more than doubled the capital base of the company from end-2023, will improve Euroins' capitalisation, as it lifted the insurer's Solvency II (S2) ratio to 159%. The rating agency expects that Euroins' S2 ratio will be at least 140% at end-2025.
The lower investment risk, due to the capital injection, has also influenced Euroins' rating positively.
Despite Euroins' weak reserve adequacy, Fitch believes that the insurer has shown improvements in its reserving standards and that reserve deficiencies resulting in capital depletion are less likely, forecasting stable reserve adequacy at end-2025.
Even though Euroins has a strong franchise in the domestic market, Fitch also notes the company's small operating scale by international standards.
Financial performance volatility has reduced from the 2020-2023 level and Fitch expects Euroins to report small net income in 2025 and 2026.
The rating agency views Eurohold's ownership of Euroins as neutral to the rating due to the rating being carried out on a standalone basis.
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