Johannesburg, 9 Sep 2014 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Goldstar Insurance Company Limited of A+(UG); with the outlook accorded as Stable. The rating(s) are valid until 08/2015.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to Goldstar Insurance Company Limited (“Goldstar”) based on the following key criteria:
Goldstar’s capitalisation is viewed to be very strong, with international solvency trending above 200% since F10, while comfortably complying with statutory requirements. Going forward, sustained strong solvency metrics are forecast to be maintained. Capital support is further enhanced by the insurer’s conservative investment policy, which translates into strong liquidity metrics, which GCR expects to remain robust over the rating horizon. An offsetting rating factor, however, stems from the significantly high degree of counterparty exposure, given that all cash holdings are currently placed in an associated, unrated bank.
The insurer has evidenced consistently high levels of underwriting profitability throughout the review period. This has been supported by conservative underwriting standards and sizeable profit commission recoveries. GCR views the underwriting profitability trend to be indicative of sustained strong earnings capacity going forward. While note was taken of the insurer’s conservative per risk retention metrics that serve to protect net profitability, the company’s net account is exposed to potential accumulation risk, owing to the absence of catastrophe cover.
Goldstar reflects a moderately strong business profile based on its position as the fourth largest player in the industry, holding a 6.1% market share (F12: 6.3%). This, however, remains significantly behind the market leader at 24%. GCR also notes that net premium diversification across lines of business is viewed to be limited, with motor accounting for 72% of NPE in F13. This is partially offset, however, by the low product risk associated with this line, as well as management’s historical track record in sustaining motor profitability.
Upward movement on the rating or outlook could develop if Goldstar expands its market profile, and improves its net premium diversification base, whilst maintaining a stable and profitable underwriting track record. This would need to be accompanied by the maintenance of solvency at appropriate levels and a notable reduction in bank counterparty exposure to a more balanced level. A marked deterioration in the insurer’s underwriting performance over a prolonged period, thereby exerting strain on key credit protection metrics, could result in negative rating action.
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NATIONAL SCALE RATINGS HISTORY
Initial rating (May/2007)
Claims paying ability: A(UG)
Last rating (Jun/2013)
Claims paying ability: A+(UG)
Sector Head: Insurance
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Insurance Companies (Updated July 2014)
Goldstar Insurance Company Limited rating reports, 2007-2013
RATING LIMITATIONS AND DISCLAIMERS
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SALIENT FEATURES OF ACCORDED RATINGS
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.
Goldstar Insurance Company Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Goldstar Insurance Company Limited with no contestation of the rating.
The information received from Goldstar Insurance Company Limited and other reliable third parties to accord the credit rating(s) included the latest available audited annual financial statements for 2013 (plus four years of comparative numbers), full year detailed budgeted financial statements for 2014, year to date management accounts to June 2014, the 2014 reinsurance cover notes and other non-public statistical information on the company and/or industry.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
GCR affirms Goldstar Insurance Company Limited’s rating of A+(UG); Outlook Stable.