Global Credit Ratings (GCR) has upgraded the domestic currency claims paying ability rating of First Assurance Company Ltd (“First Assurance”) to A-(KE) (A minus).
In conjunction with sustained robust premium growth, GCR said First Assurance has demonstrated an ability to generate underwriting profits throughout the review period, which has been supported by a continued downward trend in the relative cost base.
“Investment risk is considered low to moderate, as evidenced by the largely liquid investment portfolio and adequate liquidity measures. A degree of capital risk is, however, evident, given that property represented 69% of FYE11 capital, albeit this is expected to reduce to 48% in F12,” said GCR in a statement.
GCR also noted an improvement in the company’s international solvency margin in F11 to a review period high of 49% from 40% in F10. This ratio is expected to pierce 50% in F12, whilst the life fund continues to reflect a strong surplus of KShs185m (F10: KShs174m).
According to GCR, whilst underwriting margins on motor have improved in recent years, given its sizeable contribution to the net book and the associated level of underwriting volatility displayed therein, operational risk is considered high.
Going forward, non-life GWP is forecast 19% higher at KShs2.8bn in F12, driven by management’s intention to deepen penetration into personal lines business. “Growth in the medical book is a key priority, with new products to be developed. With the earned loss ratio expected to remain stable at 69%, the insurer is projecting a further, albeit reduced underwriting profit of KShs134m (F11: KShs141m).”
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