Global Credit Rating (GCR) has affirmed Occidental Insurance company national scale claims paying ability of A-(KE) giving it a stable outlook.
The South Africa-based agency has said the insurer reflects strong risk-adjusted capitalisation, supported by limited market risk exposures and well-contained insurance risk.
GCR expects capitalisation to remain strong on account of sound internal capital generation and a conservative dividend policy. The rating is valid until December 2018.
“The insurer’s reinsurance panel reflects a sound aggregated level of credit strength, with maximum net deductibles viewed to be moderately high relative to capital,” the agency said.
GCR expects the firm’s liquidity metrics to continue within a strong range over the rating duration, supported by healthy operating cash flow generation and conservative asset allocation, with the bulk of investments held in liquid assets.
It noted that underwriting contractions have been partially offset by sound investment income, with return on revenue equating to a healthy nine per cent in 2016.
While management expects underwriting margins to recover to moderately strong levels in 2018 (four per cent), GCR notes the potential for sustained underwriting compression over the outlook horizon due to elevated claims and lower efficiencies.
The insurer’s business profile was assessed as sound, supported by a well-balanced and consistent earnings stream.
However, this is partially offset by intermediate competitive positioning.