GCR affirms Ace Insurance limited with A+ rating

28 January 2013 Global Credit Ratings (GCR)

Global Credit Ratings (GCR) has affirmed the domestic currency claims paying ability rating of ACE Insurance Limited (ACE SA) to A+(ZA) (A plus) with a stable rating outlook.

According to GCR, the rating is underpinned by the financial support provided by ACE INA Holdings Inc. (AIH) (rated A+), by way of a letter of comfort (to meet obligations should ACE SA be unable to do so), while the demonstrated capital support by ACE INA International Holdings Limited (AIIH)(also rated A+) in recent years is positively viewed.

ACE SA leverages off group capacity and expertise, enabling the insurer to compete with larger participants in the South African market on commercial and corporate risks. GCR says the strategic benefit of ACE SA to the broader ACE group is underpinned by the insurer’s strong gross profitability.

Furthermore, GCR says the level of reinsurance support provides ACE SA with significant capacity relative to the size of its balance sheet. “While the majority of cessions are placed within the group increasing counterparty concentration risk, note is taken of the reinsurer’s strong credit rating and the letter of credit from Citibank to meet reinsurance obligations.”

According to GCR, ACE SA’s capital support is further enhanced by the insurer’s conservative investment posture, which mitigates capital risk in the event of market volatility, while also translating into comfortable liquidity metrics.

“ACE SA’s stand-alone performance is dependent on the successful execution of its medium term growth strategy, coupled with the maintenance of strong underwriting disciplines that have supported the healthy gross underwriting profit track record,” says GCR.

GCR also says while the ontake of a new UMA has introduced a level of operational risk, , note is taken of the expanded earned premium base that is expected to be sustained going forward, providing a degree of critical mass in the key property line.

“This notwithstanding, cognisance is taken of the limited diversification within the insurer’s risk premium base, particularly in light of certain systemic challenges in property in the market,” concludes GCR.

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