Announcements

GCR affirms RM Insurance Company (Pvt) Limited’s rating of A-(ZW); Outlook Stable.

Johannesburg, 02 Jun 2014 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to RM Insurance Company (Pvt) Limited of A-(ZW); with the outlook accorded as Stable. The rating(s) are valid until 05/2015.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to RM Insurance Company (Pvt) Limited (‘RMI”) based on the following key criteria:

The rating is supported by the insurer’s market position as the leading domestic non-life insurer (14% market share), in addition to demonstrable shareholder links/parental support (being a subsidiary of Old Mutual Zimbabwe, in turn, owned by Old Mutual Plc). On the back of sound retained earnings, shareholders’funds increased further at FYE13, to a review period high of US$11.6m. This underpinned higher solvency metrics, which are forecast to rise to between 65% and 70% in F14. Similarly, strong cash generation continued to drive robust operating cash flows. As such, liquid assets rose sharply and equated to a sizeable 79% of total investments in F13, with key liquidity metrics measuring well above industry norms. No change in the investment strategy is envisioned in the medium term.

Robust volumes, coupled with cost efficiencies, underpinned a review period high underwriting margin of 20% in F13. A sound underwriting trajectory is expected to be maintained going forward.Notwithstanding recent improvements, the highly uncertain socio-political outlook, adverse macroeconomic fundamentals and low industry entry barriers present considerable operational challenges.

Given that RMI’s national scale rating currently matches GCR’s rating ceiling applicable for the Zimbabwean market, an upgrade of the rating is considered unlikely in the absence of a review of key industry risk factors. Downward rating pressure may arise from a persistent deterioration in the underwriting performance coupled with a weakening in key credit protection measures. The highly uncertain socio-political outlook is likely to exacerbate challenges within the operating climate, constraining capital inflows and economic growth. Should this deteriorate further, the rating ceiling of the insurance sector may be reviewed.

For a detailed glossary of terms utilised in this announcement please click here

NATIONAL SCALE RATINGS HISTORY

Initial rating (May/2009)
Claims paying ability: A-(ZW)
Outlook: Stable

Last rating (May/2013)
Claims paying ability: A-(ZW)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst Secondary Analyst
Marc Chadwick Damien Dube
Sector Head: Insurance Junior Analyst
(011) 784-1771 (011) 784-1771
Chadwick@globalratings.net Dube@globalratings.net

Committee Chairperson
Dirk Greeff
Head: Financial Institution Ratings
(011) 784-1771
Dgreeff@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Insurance Companies (July 2013)
RM Insurance Company ratingreports, 2009-2013

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THISLINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OFINTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.

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.

RM Insurance Company (Pvt) 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 RM Insurance Company (Pvt) Limited with no contestation of the rating.

The information received from RM Insurance Company (Pvt) Limited and other reliable third parties to accord the credit rating(s) included the latest available 2013 annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements for 2014, year to date management accounts to February 2014, the 2014 reinsurance cover notes, and other information related to the credit rating exercise.

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.

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