Johannesburg, 04 Dec 2013 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Regent Insurance Company Limited of AA-(ZA); with the outlook accorded as Stable.
Global Credit Ratings has accorded the above credit rating(s) on Regent Insurance Company Limited based on the following key criteria:
Regent Insurance Company limited (“Regent”) is a wholly owned subsidiary of Imperial Holdings Limited (“Imperial”), a diversified multinational mobility-focused group. The insurer was incepted in order to provide for Imperial’s insurance requirements, and that of its after sales customers, and it has thus traditionally focused on motor related insurance products.
A supporting factor to the rating is the financial flexibility provided by Imperial, as well as its extensive distribution platform, which provides strategic leverage. The insurer’s current capitalisation is considerate adequate, with CAR cover reported at a sound 2.2x at FYE13 (FYE12: 1.9X), reflective of the lower capital charge on motor business. While note is taken of the comparative decline in international solvency over the last two years (following the restructuring of the portfolio and accompanying shift in business mix, coupled with the implementation of a revised capital management strategy), solvency metrics are expected to remain above GCR’s minimum threshold going forward, which is supportive of the insurer’s current rating. Cognisance is also taken of the benefits derived from certain profitable specialist motor segments, which have achieved comparatively higher margins, thus supporting overall profitability throughout the review period. While the recent overhaul of the broker division is expected to improve claims management within this segment, the resultant loss of business is projected to further pressurise an already elevated operating cost structure.
The insurer has exhibited a higher risk appetite within its investment portfolio over recent periods compared to historical trends, which has elevated capital risk. This has also seen liquidity metrics concomitantly decline to review period lows. As such, management has sought to de-risk the balance sheet somewhat post FYE13, with the recovery in liquidity measures expected to be sustained over the medium term. Motor forms the core of Regent’s business mix, accounting for 88% of the risk base. In this regard, elevated underwriting risk is viewed as a further rating constraint in light of the insurer’s limited scale in its non-motor risk premium spread and given increasing competition from the broader market in the niche motor lines segment (which may induce rate pressures and increase acquisitive costs).
An upward movement of the rating or outlook could develop from enhanced earnings diversification and stable premium growth, with a demonstrated increase in underwriting margin headroom being sustained. This must be accompanied by risk appropriate solvency and liquidity levels. In terms of a downward movement, this may arise in the event of a material change in the nature of the relationship with the parent. This could also be triggered by the solvency margin falling below parameters for this rating on a sustained basis, and/or a weakening in liquidity metrics below the review period lows.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Oct/2000)|
|Claims paying ability: A+(ZA)|
|Last rating (Nov/2012)|
|Claims paying ability: AA-(ZA)|
|+27 11 784 1771|
|Regional Sector Head: Insurance|
|+27 11 784 1771|
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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; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
Regent 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 Regent Insurance Company Limited with no contestation of the rating.
The information received from Regent Insurance Company Limited and other reliable third parties to accord the credit rating included the 2013 audited annual financial statements (plus four years of comparative numbers), full year detailed budgeted financial statements for 2014, unaudited year to date management accounts to September 2014, the 2014 reinsurance cover notes, ERM processes/framework, statutory return for FYE13 and other non-public statistical information.
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.