GCR has reaffirmed The Jubilee Insurance Company of Kenya Limited’s (“Jubilee Kenya”) domestic claims paying ability rating of AA-(KE). The rating has been placed on Rating Watch.
Jubilee Kenya’s rating has been placed on watch pending the finalisation of the group budget and strategy at the Board meeting in November. This is in light of the fact that the insurer’s international solvency margin fell to 45% as at FYE11. Cognisance is taken of the Kenyan operations’ strategic importance to the overall group strategy, with management confirming that a revised group capital management plan (including capital raising initiatives) will be finalised in the next few months.
The rating also took cognisance of the company’s large investment weighting in listed equities and other non-cash investments (cumulatively representing 84% of 1H F12 non-life capital), which increases capital risk. Moreover, key liquidity measures have remained subdued over the review period, which remains a constraining factor to the rating. Notwithstanding the above, the rating was supported by Jubilee Kenya’s position as the largest insurer in the non-life market. This has been aided by the strong franchise value at group level, with robust organic growth achieved throughout the review period. In addition, the company has demonstrated a consistent improvement in underwriting profitability over the past four years, owing to the realisation of reduced delivery cost structures (following greater distribution diversity) and stabilisation of loss ratios. Furthermore, the intended separation of the life business in the short term bodes well for enhanced operational focus going forward.
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