Agusto & Co. Assigns a “ Bbb+” Rating to Saham Unitrust Insurance

  • Rating expires  30th June 2019

Nigeria’s first credit Rating Agency and a pan African leader in credit reports, Agusto & Co. limited whose strong credibility presence and ratings are globally accepted in Nigeria and across the globe has just assigned a Bbb+-‘ rating to Saham Unitrust Insurance .

The rating assigned to Saham Unitrust Insurance Nigeria Limited (‘Saham Unitrust’ or ‘the Insurer’) reflects its affiliation with Saham Finances S.A, through its subsidiary, Colina Holdings Limited which held 40% equity stake in the Saham Unitrust as at FYE2017. Saham Finances S.A is the insurance arm of the Saham Group, a pan-African conglomerate with turnover of $1.5 billion in 2017 and an outreach that extends to 27 African countries.

The rating takes into cognisance, the Insurer’s good capitalisation, good liquidity profile and acceptable investment returns during the period. Saham Unitrust has an experienced management team which oversees daily operations. However, the rating is constrained by rising underwriting and operating costs which have adversely impacted profitability and operating cash flow. In addition, the fragile macroeconomic environment continues to constrain business operations in Nigeria.

Elevated underwriting and operating costs are common trends in the Insurance Industry as the cost of acquiring and maintaining businesses continues to increase. Contributing to the rise in underwriting expenses is intense competition in the corporate segment where a considerable fraction of the Industry’s premiums is generated.

Furthermore, the corporate segment is dominated by brokers which originate over 80% of GPI. The brokers market can be better regulated, disallowing unethical practices which ultimately impacts negatively on the Industry’s overall profitability and cash flows. Operating costs have also increased on account of inflationary pressures and various initiatives targeted at improving insurance penetration.

Going forward, we expect the Industry’s cost profile to remain elevated; however, cost containment strategies by Industry operators such as reducing dominance of brokers through the use of alternative distribution channels and bancassurance are expected to moderate growth in the near term. Nonetheless, we believe brokers will continue to account for a substantial percentage of premiums generated in the short to medium term.