The Zimbabwean country claims paying ability rating accorded to Altfin Insurance Company Limited (“Altfin”) has been reaffirmed at BBB- (triple B minus), with the rating maintained on rating watch. The rating is a reflection of adequate protection factors, although there is considerable variability in risk over time due to economic and/or underwriting conditions.
Altfin’s position as one of the larger insurers in the Zimbabwean short term market is favourably viewed. In line with the broader market, Altfin competes primarily for large corporate contracts. This notwithstanding, the insurer’s strategic position is hampered by the limited capacity afforded by its capital base to underwrite large fire and engineering risks. Accordingly, the insurer has focused on penetration of personal lines business, which has provided an avenue for differentiation and growth. However, Altfin’s relative delivery cost base exceeds peer group and industry averages, placing pressure on underwriting profitability. Note is taken, however, of the improved management expense ratio for 1H F10, which has been budgeted to be maintained in the second half of the year.
Altfin’s capitalisation levels are considered weak, relative to the industry and its own risk appetite. This notwithstanding, a US$900,000 capital injection from the shareholder in the first half of F10 supported the insurer’s liquidity metrics at half-year, with FYE10 claims cash coverage projected to be retained at approximately 8 months. Notwithstanding improvements made on the socio-political front, economic growth remains constrained, while the operating climate remains difficult. This is likely to prolong industry recovery and negatively impact profitability in the short to medium term.
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