South African rating firm GCR has placed a negative ratings watch on Absa Group-owned composite insurer First Assurance, citing a weak credit profile.
GCR affirmed the national scale claims-paying ability rating assigned to the underwriter at BBB+(KE) with the rating placed on Negative Ratings Watch.
South African rating firm GCR has placed a negative ratings watch on Absa Group-owned First Assurance, citing a weak credit profile.
GCR affirmed the national scale financial strength rating assigned to the underwriter at BBB+(KE) with the rating placed on Negative Ratings Watch.
“First Assurance’s negative rating watch is premised on the execution risks related to the disposal of property that may lead to continued elevated exposure to investment property which has been limiting the entity’s solvency and liquidity improvements over the review period,” said GCR.
GCR said the First Assurance rating may be downgraded in three months should its current execution plans that involved the disposal of the unnamed property fail to materialise.
“Negative rating action may also ensue from a material reduction in earnings which result from underwriting pressures. An upgrade is unlikely over the near term. Nevertheless, improvements in risk-adjusted capitalisation and liquidity will be viewed positively as the other metrics are sustained at similar levels,” said GCR.
In September 2015, Barclays Africa, which has since rebranded to Absa Group #ticker:ABSA, bought 63.3 percent of the insurance firm’s shares for about Sh2.9 billion — which included a Sh700 million capital injection.
The prospects for Kenyan insurers have been mixed in the last three years, with a number facing capital constraints amid underwriting challenges and reduced income from investments such as property and equities.
Just last month, GCR downgraded the credit profiles of CIC Insurance Group’s #ticker:CIC general and life units.
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