A global credit rating agency, the AM Best, has affirmed the financial strength rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of AXA Mansard Insurance Plc in the insurance industry.
The agency also revised the firm’s outlooks to stable from negative.
The ratings reflected AXA Mansard’s balance sheet strength, which AM Best categorised as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect rating enhancement from the AXA group.
The revision reflects AM Best’s expectation that AXA Mansard’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), would remain at the strongest level over the medium term, benefiting from the de-risking of its investment portfolio, and that the company’s underwriting performance will gradually improve.
AXA Mansard’s balance sheet strength was underpinned by risk-adjusted capitalisation at the strongest level, as measured by BCAR.
“Capital consumption is significantly influenced by the company’s real estate holdings, which in 2018 equated to 73 percent of its capital and surplus.” However, AM Best expects that AXA Mansard would significantly reduce its allocation to real estate over the medium term, which it stated would have a positive impact on its future BCAR.
The balance sheet strength assessment also considers AXA Mansard’s exposure to the high level of economic, political and financial system risks that are associated with operating in Nigeria.
“AXA Mansard’s overall operating performance has been driven by its investment results in recent years, and the company’s five-year (2014-2018) weighted average return on equity of 10 percent should be viewed in light of inflation in Nigeria, which has ranged between eight per cent and 17 per cent over the same period.
“Underwriting performance has been modest, with the company reporting a five-year average non-life combined ratio of 107 percent impacted by its high but declining expense ratio, which fell to 39 percent in 2018 from 54 percent in 2014,” it added.
AM Best, said although a rapidly growing health insurance portfolio was negatively impacting the company’s loss ratio, it has been profitable for the company due to its low expense ratio. “Over the medium term, AM Best expects growth of the health book of business to improve the company’s technical results.”
AXA Mansard is a composite insurer concentrated in the Nigerian market. The company, has an aggressive growth strategy within the health insurance line, which in 2018 led to it becoming a market leader in this segment.