Capital Markets

South Africa-based GCR downgrades CIC Insurance’s credit rating

cic

CIC Insurance Group chairman Nelson Kuria. FILE PHOTO | NMG

brianngugi_img

Summary

  • GCR assigned CIC Life a financial strength rating of BBB (KE), from BBB+ (KE), citing a deterioration in the group’s credit profile with a negative outlook.
  • It also downgraded CIC General’s financial strength rating of BBB+ (KE) to BBB (KE) with a negative outlook.

South Africa-based Global Credit Ratings (GCR) has downgraded the credit profiles of CIC Insurance Group general and life units.

GCR assigned CIC Life a financial strength rating of BBB (KE), from BBB+ (KE), citing a deterioration in the group’s credit profile with a negative outlook.

It also downgraded CIC General’s financial strength rating of BBB+ (KE) to BBB (KE) with a negative outlook.

The agency said the rating downgrade on CIC Life followed the group’s continued elevated exposure to investment property — mainly land banks — on the backdrop of a significant shareholder loan, which is on commercial terms.

“The negative outlook reflects high susceptibility of investment property to market risk amid the Covid-19 pandemic, which could moderate the group’s capital assessment over the medium term,” the rating firm said.

On the life unit, GCR noted over the past five years, the underwriter’s capacity to generate internal capital has been sluggish considering weak earnings performance demonstrated over the same period.

“Consistent with GCR’s group ratings approach, CIC Life’s overall risk score was capped by the group’s creditworthiness despite having a stronger standalone credit profile relative to its parent company,” said GCR.

The downgrades come at the time the insurance industry is recovering from the Covid-19 shocks.

CIC Insurance Group posted a Sh296.8 million net loss in the year ended December 2020, breaking its 13-year profit-making run that went back to 2007.