Global Credit Ratings (“GCR”) has assigned BBB+ credit rating to Law Union and Rock Insurance plc (“LUR”) on national scale claims paying ability with a positive outlook.
The rating was based on the fact that LUR introduced a new management team towards the end of 2014, in order to drive the insurer’s medium term strategic objectives. Thus, ability of the new team to sustain key credit metrics at current levels represents a key consideration over the rating horizon, GCR said.
According to the agency, the insurer reflects strong risk adjusted capitalisation, following the clean-up of the debtors’ book, albeit capital appreciation in absolute terms remained constrained.
” The ratio of shareholders’ funds to net written premiums (“NWP”) remained strong, albeit contracting (FYE14: 137 percent; FYE13: 159 percent), on the back of sound gross premium growth. Furthermore, the statutory solvency ratio remained sound at 1.3 xs at FYE14 (FYE13: 1.2 xs).
It noted that liquidity metrics improved over the last two years, supported by sound operating cash flow generation and the liquidation of property investments (of which the proceeds were largely invested in liquid instruments). As such, the two year average claims cash coverage ratio equated to a strong 28 months, compared to the prior two year average of 11 months.
Similarly the average cash coverage of net technical liabilities equated to 1x, compared to 0.5 xs over the prior two years.
GCR expects liquidity metrics to remain within a moderately strong range over the rating horizon, underpinned by
management’s commitment to maintain the current investment allocations.
Earnings capacity is largely a function of the insurer’s investment portfolio (FYE14: N4.9bn; FYE13: N4.1bn), which generates sound investment income.
LUR reflects a moderate competitive position and fairly well diversified earnings. In this regard, the insurer registered an estimated market share of 2 percent within the Nigerian short term insurance industry, while earnings were fairly well spread across five lines of business (each contributing more than 10% to gross premiums). The competitive position is largely supported by moderately diversified branch networks, and well-established broker relationships. As such, management expects to improve its market position over the medium term.
Modestus Anaesoronye
