Lombard Insurance Company Limited retains A+(ZA) rating
GCR has maintained the national scale claims paying ability rating of Lombard Insurance Company Limited (“Lombard”) at A+(ZA) (single A plus), “Stable” outlook.
The rating considers Lombard’s strong growth over the review period, driven by the diversification of its risk premium base, whilst maintaining its established market position in the guarantee segment. The insurer’s enhanced market profile has also been supported by the strong franchise value, specialised underwriting and strong management teams. The rating is further supported by Lombard’s scientific underwriting approach and experience in managing the associated business risks, which has seen the insurer consistently register underwriting surpluses through the cycle (underpinned by certain profitable specialist segments). This notwithstanding, the expansion into UMA sourced business lines has induced underwriting margin compression, converging to that of the overall industry. Solvency remains adequate and is supportive of the insurer’s current rating as per GCR’s solvency framework. Cognisance was also taken of the demonstrated capital support from shareholders over the review period. It is GCR’s view that further capital will be required to support business growth and diversification in the medium term. The insurer’s liquidity metrics remain sound, albeit below levels seen prior to F09, which was considered in the context of the 13.7% (FYE11: 13.2%) of gross loans. Accordingly, the credit loss ratio (defined as the change in the insurer’s underwriting portfolio composition. The returns from the investment portfolio, specifically the preference share portfolio, support operating profitability.
An upward movement of the rating or outlook could develop with continued growth augmenting earnings diversification, whilst maintaining underwriting profitability. This must be accompanied by risk appropriate solvency levels. A downward rating movement, may arise if a continued deterioration in the operating performance was evidenced, commensurate with the solvency margin falling below GCR’s comfort level for this rating on a sustained basis, and/or a weakening in liquidity metrics.
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.
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