GCR has reaffirmed Lion of Africa Insurance Company Limited’s (‘Lion’) domestic ZAR currency claims paying ability rating of A- (single A minus). Furthermore, the domestic ZAR currency long term subordinated debt rating was maintained at BBB- (triple B minus) and was taken off rating watch.
Lion has a well defined growth strategy and has made good progress in terms of recovering market share that was lost in 2008. Furthermore, continued expansion into the commercial and personal lines markets is expected to enhance risk diversification and cost efficiencies going forward.
Notwithstanding strong premium growth, the international solvency margin remained stable and is not expected to decline below 45% in the short to medium term. GCR considers this level to be appropriate for the current rating, considering the insurer’s strong technical focus and risk management approach, as well as the relatively conservative investment mix. The ratings were further supported by the strengthening in underwriting and net profitability over the past two years. Debt rating ratios improved significantly in F10, with a further strengthening expected in F11, assuming that the insurer meets its budget.
Despite the consistent improvement in volume efficiencies, Lion’s delivery cost ratio remains above the industry average, thereby limiting flexibility in higher claiming years. Furthermore, cognisance was taken of the insurer’s large exposure to property risks, which are more susceptible to claims volatility. This was demonstrated by the increase in the loss ratio for the year to date, following some large property claims.
Susan Andrews https://globalratings.net/uploads/files/June_2011.pdf
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