Lion of Africa Insurance Company Limiteds (“Lion”) domestic ZAR currency claims paying ability rating of A (single A) has been reaffirmed. In addition, GCR has placed Lions rating on “Positive Outlook”. The rating denotes a high credit quality, with above average protection factors, although there is an expectation of variability in risk over time due to economic and/or underwriting conditions.
According to Jackie Swan, senior analyst at GCR, the high rating stems from the insurers status as the largest black owned short term insurer in South Africa, and the associated growth benefits derived therefrom. In addition, cognisance was taken of managements extensive experience in the short term insurance market. The rating was further supported by Lions improved solvency level in F05 to 43% (F04: 39%), coupled with the fact that its largest shareholder has reaffirmed its commitment to support capital if required. The insurer displays a highly conservative investment portfolio, which has served to maintain strong claims cash coverage ratios, at 15 months.
Lions reduced operational dependence on Santam was also favourably viewed, following the re-integration of its back-office functions, and expects to complete the installation of its new IT system in early F07. It was further noted that this new operating platform is expected to significantly enhance productivity and provide Lion with the capacity and functionality required to grow the business going forward.
The South African short term insurance industry has begun to experience a softening of rates following increased competitive pressures, and has resulted in suppressed underwriting margins being recorded in 2005. Taken in this context, it was noted that although Lions underwriting margin declined, it remained a strong at 6.3% in F05.
Article provided by: FAnews