PKV: The balance rating losers – health insurance

Background: Private health insurance is faced with growing challenges, which are further exacerbated by rising healthcare costs, demographic change and technological progress. Insurers must not only ensure that they can protect their policyholders in the event of illness, but also remain economically stable in order to meet the demands of a dynamic market. This requires long-term provisions, a clever capital investment policy and efficient cost management.

Against this background, MAP Report 935 serves as a comprehensive analysis tool to assess the financial stability of private health insurers over the period from 2019 to 2023. By looking at this period, short-term fluctuations can be filtered out and a clear picture of the insurers’ economic performance can be drawn. Ten central key figures are intended to provide information for the analysis about how well an insurer is positioned to overcome future challenges.

Key rating metrics:

• Net return: Measures the success of an insurer’s investment policy. A higher net return indicates better management of investments.
• Valuation reserve ratio: Indicates the potential for exceptional returns from investments. It reflects the difference between the market value and the book value of the investments.
• RfB supply rate: Shows how much of the gross premiums goes into the provision for premium refunds (RfB). These provisions help to cushion future premium increases.
• RfB-Quote: Clarifies how high the provisions for premium refunds are in relation to the gross premiums.
• Actuarial result ratio: Indicates whether the premiums are sufficient to cover the costs incurred. Negative ratios show that capital gains must be used to cover costs.
• Surplus utilization rate: Shows how much the insured participate in the overall economic success of an insurer, including direct credits from the interest income from retirement provisions.
• Provision ratio: Indicates what percentage of income flows into provisions to cushion rising health care costs in old age.
• Closing cost ratio: Evaluates how much an insurer spends on new contracts. High closing costs can weigh on the company’s efficiency.
• Administrative expense ratio: Shows how efficiently an insurer organizes its internal structures. Low administrative costs indicate high efficiency.
• Solvency ratio: Measures an insurer’s ability to handle extreme economic events and remain stable in times of crisis.

Ratings in the MAP rating:

In order to make the economic stability of private health insurers comparable, the individual key figures were converted into points and weighted differently. Particularly important indicators, such as net return and solvency ratio, were given higher weighting because they largely determine an insurer’s long-term financial strength. The overall score that an insurer was able to achieve was then translated into a five-point grading scale, which ranges from “excellent” to “sufficient” and reflects the insurer’s performance in this balance sheet rating. The following grades were achieved:

1. excellent (mmm+): Ab 255 points (85% or more of the maximum possible score). The top grade for companies with outstanding balance sheet strength.
2. very good (mmm): Between 225 and 254 points (75% to 84%). Insurers in this category show strong economic performance.
3. good (mm): Between 195 and 224 points (65% to 74%). These insurers have a solid balance sheet but have room for improvement.
4. satisfactory (m): Between 165 and 194 points (55% to 64%). Insurers in this category show deficits in several areas.
5. sufficient (m-): Less than 165 points (below 55% of possible points). Insurers with this rating face significant challenges and have great potential for improvement.

This photo series presents the insurers who received the lowest ratings in the current balance sheet rating. Even if they show some solid results in individual key figures, there are still clear results in other areas Potential for improvementin order to remain stable in the long term in an intensely competitive market. The study can be paid for on the Franke and Bornberg website be ordered.