Announcements

Centriq rating reaffirmed at A+

GCR has reaffirmed Centriq Insurance Company Limited’s (“Centriq”) national scale ZAR currency claims paying ability rating of A+ (single A plus). The rating is an indication of high claims paying ability and above average protection factors. Centriq is a wholly owned subsidiary of Centriq Insurance Holdings Limited, which in turn is 100% owned by Santam.

Centriq specialises in alternative risk financing and affinity solutions and the provision of underwriting facilities through a UMA partnership model. This is mostly achieved through contingency policies and cell captive facilities respectively. In the cell captive and alternative risk transfer segment, Centriq holds an estimated 19% market share.

The rating was supported by the fact that the insurer has remained adequately capitalised at the promoter level in F10, with the solvency margin expected to remain relatively stable in the near term. In this respect, including a R20m draw down facility from Santam, total available capital covered the internally calculated requirement 1.1x at FYE10, which was in line with budget and GCR’s minimum comfort level for the current rating. The conservative investment mix and comfortable liquidity measures were also favourably viewed.

The insurer has been consistently profitable at the promoter level, supported by relatively stable fee and investment income. Cognisance is, however, taken of the anticipated growth in risk assumption at the promoter level, which could increase earnings volatility going forward. Furthermore, Centriq is focusing on gradually increasing its risk participation in the cells, and is also considering several new direct business opportunities. Accordingly, the relatively stable fee and investment income components are expected to be complemented by a greater contribution of technical profits going forward. Cognisance is, however, taken of the higher degree of volatility associated with underwriting activities. In view of the large solvency shortfalls in some of the cells, capacity for growth into this type of business may be limited in the near term.

Craig Davids
https://globalratings.net/uploads/files/September_2011.pdf

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