GCR affirms AAA rating on Absa Insurance

1/24/2012 12:40:01 PM

Global Credit Ratings (GCR) has affirmed its AAA (triple A) rating on the claims paying ability of Absa Insurance, a wholly owned subsidiary of Absa Group (ASA). According to GCR, the rating is supported by the fact that Absa Group's underlying client base provides Absa Insurance with a sizeable and stable revenue stream, augmented by an extensive distribution force and strong franchise. GCR says capitalisation levels are supported by the insurer's conservative investment stance (which also bolsters liquidity measures), as well as the low levels of risk retained for the insurer's net account. Furthermore, reinsurance counterparties are of a high credit quality. "The underwriting margin has declined consistently over the review period, exacerbated by the elevated loss experience in the commercial motor and property books. The competitive management expense ratio relative to the industry, however, supports profitability, with improved efficiencies remaining a key focus of management in the medium term." Looking ahead, benign home and vehicle loan growth, coupled with renewed motor rates pressure and the successful spin-off of a key revenue generating UMA, have resulted in management revising the full year F11 budget lower. This has prompted a major focus on containing management expenses, which will be supportive of the underwriting margin in the short term. "Penetration into the commercial segment supports revenue diversification and growth prospects, given the increased competition in the personal lines segment. This notwithstanding, loss ratios remain high and need to be addressed through improved risk pricing and geographical diversification."

I-Net Bridge