GCR has reaffirmed Absa Insurance Company Limited’s (“Absa Insurance”) national scale ZAR currency claims paying ability rating of AAA (triple A).
Absa Insurance is wholly owned by Absa Group, one of the largest banking institutions in South Africa. Absa Group is in turn a subsidiary of Barclays Bank Plc (UK), which is rated AA- (double A minus) on an international scale. The group’s underlying client base provides Absa Insurance with a sizeable and stable revenue stream, augmented by an extensive distribution force and strong franchise. Although the underwriting margin has declined consistently over the review period, exacerbated by an elevated loss experience in the commercial motor and property books, the competitive management expense ratio relative to the industry supports profitability. Moreover, improved efficiencies remain a key focus of management in the medium term. In terms of solvency, following significant distributions over the review period, in order to align capital with the insurer’s internally developed risk based capital model, key solvency ratios have registered consistent contractions. The international solvency margin is not forecast to reduce below 45%, which is supportive of the insurer’s current rating as per GCR’s solvency framework. Capitalisation levels are further supported by the insurer’s conservative investment stance (which also bolsters liquidity measures), as well as the low levels of risk retained for the insurer’s net account. Furthermore, reinsurance counterparties are of a high credit quality.
Lastly, penetration into the commercial segment supports revenue diversification and growth prospects, given the increased competition in the personal lines segment. This notwithstanding, loss ratios remain high and need to be addressed through improved risk pricing and geographical diversification.
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.
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