Auto & General credit rating upgraded to AA-

05 February 2007 The Mail Room

International credit rating agency Global Credit Ratings ("GCR") has upgraded Auto & General Insurance Company Limited's ("Auto & General") claims paying ability rating to AA- (double A minus). The rating denotes a very high claims paying ability, with very strong protection factors.

According to Melanie Brown, Managing Director of GCR's African operations, the company's low delivery cost structure offers protection to underwriting margins in a softening market. This is reflected by the rise in Auto & General's underwriting margin to a review period high of 16.5% in F06, which was in contrast to the experience for the industry as a whole. The Company's solid underwriting performance over the review period is further supported by its extensive statistical database, covering 20 years of underwriting, coupled with Auto & General's demonstrated underwriting expertise. In addition, Brown said that Auto & General's diversified distribution channel, combined with its position as a leading innovator in the short-term insurance industry affords the insurer with a sustainable growth model going forward."

Despite strong premium growth and a large dividend payment of R60m, the international solvency margin remained comfortable at 47% in F06, whilst the statutory solvency ratio amounted to 37%, comfortably exceeding the statutory minimum level. Catastrophe reinsurance cover limits Auto & General's net retention to R5m per event, or a low 1% of capital, providing further protection to the balance sheet. On the back of a net cash inflow of R65m for F06, the insurer posted its third consecutive increase in claims cash coverage, to 5.5 months.

According to Nigel England, financial director of Auto & General Insurance:  "Our global credit rating has an enormous impact on the Company as it provides an independent and internationally recognised measurement of an organisation's financial strength. The process also presents a useful management tool by providing management with the benefit of a knowledgeable, independent, third party opinion on the organisation and its operations.  We are extremely pleased that our rating has increased from an A+ to an AA-."


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