Global Credit Ratings upgrades SA Eagle's credit rating
Johannesburg, July 20, 2005. International credit rating agency Global Credit Ratings
(“GCR”) has upgraded South African Eagle Insurance Company Limited’s (“SA Eagle”) domestic ZAR currency claims paying ability rating to AA+ (double A plus), from AA (double AA). SA Eagle is the fourth largest insurance company in South Africa, which according to estimates made by GCR, holds a market share of approximately 11%.
According to Jackie Swan , senior analyst at GCR, the rating was supported by the notable improvement in underwriting performance in F04, more specifically the turnaround of the motor book, which comprises around 55% of net premium income and reported an underwriting profit of R43m in F04 (F03: R27m deficit), the first profit in 7 years. Furthermore, cognisance was taken of SA Eagle’s relative size in the local market, as well as its affiliation with the Zurich Financial Services Group (“Zurich”). Swan also noted that the rise in the international solvency margin to 62.5%, compared to 51.9% in F03, as well as the notably higher level of cash and short term deposits of R684m (F03: R394m), combined with slightly lower net claims (resulting in an improved claims cash coverage ratio of 5.3 months cover in F04, from 3 months in F03) also served to support the rating.
Swan said that cognisance was, however, taken of the stagnant growth in the short term insurance market and concomitant rise in the level of competition (particularly in the corporate sector), as well as the industry’s exposure to exchange rate risk (specifically a depreciation of the Rand), which tends to negatively impact replacement and spares costs, particularly in the motor class.
