Announcements

GCR upgrades GA Angola Seguros S.A.’s rating to A+(AO); Outlook Stable.

Johannesburg, 28 Nov 2014 — Global Credit Ratings has today upgraded the national scale claims paying ability rating assigned to GA Angola Seguros S.A. to A+(AO); with the outlook accorded as Stable. The rating is valid until June 2015.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to GA Angola Seguros S.A. (“GA Angola”) based on the following key criteria:

GA Angola has evidenced a notable strengthening in capitalisation over the past two years, with risk adjusted capital adequacy viewed by GCR to be strong, underpinning the rating upgrade. Enhanced capital adequacy has been underpinned by the insurer’s disciplined profit retention strategy (facilitating a high level of capital build), coupled with low risk asset allocation. This is expected to be sustained over the medium-term.

GA Angola has registered a very strong profit trend throughout the review period, representing a key rating strength. GCR views the insurer’s aggregate underwriting profit margin (14%) and return on equity (20%) to be reflective of a high level of earnings capacity that is expected to be sustained over the rating horizon. Earnings are viewed to be underpinned by a disciplined underwriting approach, coupled with the favourable profiles of the risks on which GA Angola participates.

GA Angola remains a leading player in the Angolan insurance industry, with a market share of 19%. The insurer’s market position is supported by strong branding, well entrenched corporate relationships and high service level offerings. GCR expects GA Angola to defend its top tier market position over the rating horizon, in the face of an increasingly competitive and congested backdrop.

Liquidity has been measured at strong levels, underpinned by the pure cash and equivalents composition of the investment portfolio. Cash coverage of technical liabilities (1.1x), average monthly claims (43 months) and average underwriting outflows (15 months) are all viewed to point to a comfortable liquidity position. Consistency in the asset allocation strategy is expected to sustain this rating strength going forward. A degree of currency risk exists due to the large weighting of US$ call investments, given that the insurer reports in local currency.

GA Angola’s earnings diversification is viewed to be moderate, with high risk components. In terms of the latter, the sizeable premium contribution from the largest policyholder represents a medium term risk to revenue. This is partially offset by the favourable profitability of select portions of business within this portfolio, which we view the insurer to be well positioned to defend.

Reserving has been measured at high levels over the review period and is expected to be sustained over the medium. Reserving is supported by a fairly sophisticated framework, derived from a fully integrated underwriting system and external technical support.

Further upward rating movement may be achieved through a strengthening in competitive positioning and capitalisation, coupled with the maintenance of aggregate profitability and liquidity at existing high levels. A material and sustained reduction in key credit protection metrics, an increase in asset risk, and/or a notable reduction in earnings capacity, may result in negative rating movement.

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

NATIONAL SCALE RATINGS HISTORY

Initial rating (August 2007)
Claims paying ability: BBB+(AO)
Outlook: Stable

Last rating (May 2013)
Claims paying ability: A(AO)
Outlook: Positive

ANALYTICAL CONTACTS

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

Secondary Analyst
Rodwell Chevure
Junior Analyst: Insurance
(011) 784-1771
Chevure@globalratings.net

Committee Chairperson
Sheri Few
Senior Analyst: Insurance
(011) 784-1771
Few@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Insurance Companies, Updated July 2014
GA Angola rating reports 2007 – 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 THIS LINK: 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 OF INTEREST, 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.

GA Angola Seguros S.A. 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 GA Angola Seguros S.A. with no contestation of the rating.

The information received from GA Angola Seguros S.A. and other reliable third parties to accord the credit rating(s) included the audited annual financial statements for 2013 (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 August 2014, the reinsurance cover notes for 2014, and other documentation related to the credit rating.

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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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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