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GCR gives Barclays First Assurance negative outlook

A screenshot of the GCR website. PHOTO | FILE
A screenshot of the GCR website. PHOTO | FILE 

South African ratings firm GCR has assigned a negative outlook to Barclays Africa-owned composite insurer, First Assurance, citing expectations of weak profits.

GCR affirmed the national scale claims paying ability rating assigned to the underwriter at A, but added a negative outlook for the firm.

Its underwriting margin stood at -19 per cent at the end of 2016 — from an average of four per cent between 2012 and 2015.

“First Assurance’s rating has been placed on negative outlook, owing to earnings registering well below original expectations, with continued profit weakness budgeted to persist going forward. Profitability, having registered within a moderately strong aggregated range in previous review years, weakened substantially in the 2016 financial year,” said GCR.

“The reduction in profitability was spurred in large by a spike in the loss ratios for motor and workmen’s compensation, while a sustained high medical loss ratio continued to suppress margin headroom.”

In September 2015, Barclays Africa bought 63.3 per cent shares of the insurance for about Sh2.9 billion — which included Sh700 million capital injection. 

Mixed outlooks

GCR has assigned a mix of positive and negative outlooks to Kenyan insurers in recent weeks, indicating uncertainly over the prospects for insurers who are facing up to new capital rules amid tough competition.

The ratings firm last week rated Jubilee Insurance #ticker:JUB and ICEA LION at AA-, with their outlook accorded as stable.

Earlier this week it affirmed the positive claims paying abilities of UAP Insurance Kenya at AA- with a stable outlook. Last month, the firm rated Mayfair Insurance at A- with a positive outlook.

On the other hand, GCR issued a negative outlook on CIC Insurance in June.

Last week the firm issued a negative outlook for Saham Assurance Company and announced it will no longer rate the firm.