Standard Alliance Insurance Plc, has been rated ‘BBB’ by Global Credit Rating, a South African-based rating body, in recognition of its consistent claims paying ability.
The company, which recently secured its shareholders’ nod to merge with its life sister company, Standard Alliance Life Assurance Limited, for greater strength and superior bottom line performance was at its 2016 annual general meeting in Lagos, rated high by its shareholders for proper treatment of its investors.
Passing a remark in its conclusive report released during the month of August, the rating body observed that the general business underwriting company’s gross claims declined by 17 percent during the year to N887million with an improvement noted across most classes of business barring fire and marine line.
It stated that while an 11 percent rise in net claims is anticipated during the year, the net incurred loss ratio is expected to contract to 21 percent in 2016 financial year based on the expected growth in premiums.
While noting that the company was stable in its rating outlook, the rating body further observed that shareholders’ funds rose by 28 percent to N4.2bn at 2015 financial year end on the back of internal capital generation.
It further stated that in conjunction with a substantial reduction in retained premium volumes, this led to an improvement in risk adjusted capitalisation with the ratio of shareholders’ funds to net earned premium improving to 172 percent in 2015 from 86 percent in 2014 financial year end.
The report noted that the company’s statutory solvency regained compliance at 2015 financial year end with admissible asset coverage of liabilities, stating that “going forward, risk adjusted capital adequacy is expected to remain at an adequate level.”
While observing that the company’s focus remains on penetrating the retail market with management confirming new products which were in the offering to further drive the retail growth, the report stated that SA Insurance’s realised investment income rebounded in 2015 following the share of profit of an associate company during the year.
According to the report, the insurer’s share of profit or loss has been included in the investment income calculation over the period. Total interest, rental and dividend income lowered to N197million in 2015, underpinned by reductions in interest income. Overall, operating margin equated to 3 percent in 2015,” stating that “similarly, investment yield registered an improvement to 8 percent from a negative 6 percent. previously.
The report further claimed that the underwriting company which was also rated BBB last year for its consistent claims administration recorded net profitability during year 2015 after three consecutive years of a net loss, observing that net profit after tax was aided by a write-back on impairment] on loans and receivables which had previously been provided for.
It further noted that the share of profit of an associate company (which bolstered investment income), coupled with a fair valuation gain during the year further supported the company’s return to profitability.
The report also noted that African-Re and Continental Re continued to lead the company’s reinsurance programme for 2016 with each covering 40 percent of cession across treaties, adding that other participating reinsurers included WAICA Re (10percent), Nigeria Re (7 percent ) and NCA recovering the remaining 3 percent cession.