Johannesburg, 24 May 2013 — Global Credit Ratings has today assigned an initial national scale claims paying ability rating of AA-(BW) to Regent Insurance Botswana (Pty) Ltd; with the outlook accorded as Stable. The rating(s) are valid until 5/2014.
Global Credit Ratings has accorded the above credit rating(s) on Regent Insurance Botswana (Pty) Ltd based on the following key criteria:
Regent Insurance Botswana (Propriety) Limited (“Regent Botswana”) is a wholly owned subsidiary of South Africa based Regent Insurance Company Limited (“Regent South Africa”). Incorporated in 1997, Regent Botswana has since established itself as a prominent player in the domestic short term insurance arena, leveraging off its well entrenched affinity channels (with a particular focus on motor business) and strong brand value, with the latter notably underpinned by implicit parental support derived from Regent South Africa.
Robust retained earnings have seen capital reserves accumulate at a healthy rate over the review period, translating into an adequate level of solvency (on both a statutory and international basis), which is expected to support the insurer’s business model over the medium term. In part, this has been underpinned by a sound underwriting track record, with the underwriting margin trending persistently upwards over the review period, to close at a robust 19.4% in F12 (F11: 17.8%). Further underpinning the rating was the relative size and high degree of liquidity of the insurer’s investment portfolio, with key liquidity metrics reported at comfortable levels throughout the review period. Whilst a heightened degree of institutional concentration in terms of cash holdings is noted, this is mitigated by the strong credit quality of the respective entity. Furthermore, cognisance is taken of recent efforts by management to diversify the business mix, thus reducing reliance on motor business (albeit this book continues to contribute positively to overall profitability).
In view of the industry risk characteristics embodied within the Botswana insurance environment, the industry rating ceiling has been capped at AA-(BW) (double A minus), with Regent Botswana currently reflecting the highest rating an insurance company in Botswana can be awarded. Downward movement of the rating could emanate from a severe deterioration in key operating ratios and/or a decline in solvency metrics below forecast levels. Further, the adoption of a significantly more aggressive investment strategy (resulting in a marked weakening in key liquidity metrics) could also adversely impact the rating.
NATIONAL SCALE RATINGS HISTORY
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
GCR’s Criteria for Rating Short Term Insurance and Reinsurance Companies
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GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
Regent Insurance Botswana (Pty) Ltd participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Regent Insurance Botswana (Pty) Ltd with no contestation of the rating.
The information received from Regent Insurance Botswana (Pty) Ltd and other reliable third parties to accord the credit rating included the latest audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, the current year reinsurance/retrocession cover notes, actuarial valuation statement, debtors provisioning policy document, ERM processes/framework (including catastrophe management framework), reserving methodologies, capital management policy.
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