Johannesburg, 31 May 2013 — 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 5/2014.
Global Credit Ratings has accorded the above credit rating(s) on RM Insurance Company (Pvt) Limited based on the following key criteria:
RMI is a wholly owned subsidiary of RMIH, which is in turn an Old Mutual subsidiary, through a 51% direct share holding and a 41% Mutual & Federal (“M&F”) stake. A domestic pension fund owns the balance. Cognisance was taken of RMI’s well established position in the domestic insurance industry (12% of 2012 GWP), underpinned by strong branding, group synergies, and robust alternative distribution channels. Furthermore, the insurer’s highly rated ultimate parent was also considered.
Shareholders interest increased further at FYE12, to a review period high of US$6.8m. This underpinned higher solvency metrics, which are forecast to rise to around 58% in F13. Furthermore, on the back of healthy operating profits, cash and equivalents were reported noticeably higher at FYE12, supportive of improved liquidity metrics. Strong volumes, together with well contained claims and cost efficiencies, underpinned a review period high underwriting margin of 18% in F12. Further, note was taken of the insurer’s ability to generate consistent underwriting profits over there view period, with double digit margins expected over the medium term. While this is viewed positively, RMI exhibits a relatively high exposure to motor (55% of NWP), with margins highly reliant on the performance of this class.
In view of the industry risk characteristics embodied with in the Zimbabwe an operating environment, the industry rating ceiling has been capped at A-(zw) (single A minus), and accordingly, upward movement of the rating is deemed unlikely over the short to medium term. Downward rating pressure may emanate from a weakening in key solvency and liquidity metrics, arising from persistent underwriting losses and/or the adoption of a more aggressive investment stance. Note was also taken of the highly uncertain socio-political outlook, which 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 as a whole would likely be reviewed.
NATIONAL SCALE RATINGS HISTORY
Initial rating (May/2009)
Claims paying ability: A-(ZW)
Last rating (May/2012)
Claims paying ability: A-(ZW)
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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.
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 info 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 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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