Three for two

GCR upgraded the Channel Life financial strength rating to A- (single A minus), from BBB+ (triple B plus) previously. Fitch Ratings has assigned the Momentum Group a National Insurer Financial Strength Rating of ‘AA+ (zaf)’ and a National Long-term Ra

According to Jackie Swan, senior analyst at GCR, the rating took cognisance of the strong turnaround evidenced in Channel Life during the past few years. The upgrade was further supported by the recent acquisition of a majority stake (50% + 1) in the company by Sanlam. (Deal subject to competition board approval).

Reacting to the news, René Otto, CEO of Channel Life, said that the effort that everyone put in during the last period had resulted in the upgrade. “This is only the beginning,” said Otto.

“The first half of the year at Channel Life was characterised by a strong sales performance, with recurring premiums up by 144%, from R63.7m. The strong foundations laid during the first half of the year is expected to result in stronger earnings in the second half.

“This strong sales performance can be attributed to the success of our multi distribution channel strategy, which was launched earlier in the year and is now starting to pay dividends.”

Otto’s management team believes that the strategy to “Africanise” the industry by focusing on the entry-level target market, even in the distribution of policies, is the right way to go.

Swan says that the company’s management team has demonstrated an understanding of the key operational challenges facing the business. Furthermore, the company’s comfortable CAR coverage was also favourably considered.

Swan said that cognisance was taken of the relative size of the life office in terms of its market share, its higher risk target market and the fact that Channel’s aggressive new business growth targets could adversely affect persistency levels, and hence, profitability in the short term.

Meanwhile Fitch Ratings has assigned the Momentum Group a National Insurer Financial Strength Rating of ‘AA+ (zaf)’ and a National Long-term Rating of ‘AA (zaf)’.

The Financial Strength Rating of AA+ reflects Momentum’s robust solvency position from the perspective of policyholders while the Long Term Rating of AA reflects the excellent solvency position from the perspective of other creditors.

“We are pleased with the favourable credit rating assigned to Momentum”, said EB Nieuwoudt, MD of the Momentum Group.

According to Fitch: “The ratings reflect Momentum’s strong business position in South Africa, solid capital position, robust new business profit margins and very strong operating performance.”

Fitch says that the rulings made by the Pension Funds Adjudicator continue to cause uncertainty in the South African life industry.

“Fitch believes that compared to peers, Momentum has a relatively low exposure to the PFA rulings. This is due to its low historical market share of retirement annuities. Fitch is further comforted by Momentum’s pro-active and responsive attitude and range of new generation products.”