BY MTHANDAZO NYONI GCR Ratings has upgraded Old Mutual Insurance Company’s national scale financial strength rating to AA, reflecting an improvement in the insurer’s financial profile.
The company’s international rating has been steadily improving over the past three years from A- of 2020 to AA- of 2021 to the AA rating of 2022.
According to GCR, the rating derives uplift from Old Mutual Zimbabwe Limited, given brand alignment, operational and risk management framework integration.
It also reflects strength in the company’s financial profile and ability to pay claims, strong market position exhibited and sustained over the past three turbulent years.
There is a sustained improvement in earnings and competitive position, a well-diversified business mix which shows a strong offering and active thrust to meet customer needs.
“The insurer’s liquidity profile strengthened on the back of sound internal cash generation,” GCR said.
In a Press statement, Old Mutual said: “We are committed to continuously providing you with exceptional products and ensuring the highest service excellence that you have come to know and enjoy.”
GCR said Old Mutual Insurance maintained coverage of aggregate risk exposures within a strong range, underpinned by internal capital generation.
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Underwriting profitability moderated due to an unfavourable claims experience. As such, the net incurred loss ratio registered at 50% in the financial year 2021, up from 35% recorded in 2020, translating to a lower underwriting margin of 2%.
The moderation in underwriting performance was, however, bolstered by unrealised gains, with net income after tax closing higher at $1,6 billion in the financial year 2021.
“Note is taken of continued claims elevation in 1Q F22 (the first quarter of 2022), underpinned by large fire claims, with the net incurred loss ratio registering at 59% during the interim period,” GCR said.
“Given the early impact of the foregoing large claims, management expects the loss ratio to register around 50%, supported by strict underwriting practices. Going forward, we expect net profitability to be sustained within the current range, underpinned by unrealised investment income while management’s ability to contain claims over the rating horizon is a key rating consideration.”
The business profile is viewed to be credit positive, reflecting a recovery in market share to 15%.
“This was supported by growth in foreign currency-denominated policies, thus propelling the insurer to the top position in the local short-term insurance industry. Furthermore, the business mix is viewed to be well diversified with four lines of business contributing materially to revenue, albeit partially offset by limited geographic diversification,” the ratings agency said.
“The insurer’s market share is expected to slightly improve over the rating horizon, supported by increased cross-selling opportunities within the group, while policyholder diversification is likely to improve with the on-boarding of retail policyholders.”
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