LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B (Fair) and issuer credit rating of “bb+” of Mansard Insurance Plc (Mansard) (Nigeria). The outlook for both ratings remains stable.
The ratings of Mansard reflect its strong risk-adjusted capitalisation, good business profile and strong underwriting performance. An offsetting rating factor relates to Mansard’s investment strategy, which has a significant concentration on both land and property under development asset; however, A.M. Best acknowledges the efforts made by the company to reduce the property exposure. The ratings of Mansard also incorporate A.M. Best’s view of its exposure to the very high political and financial system risks associated with its operation in Nigeria.
With regard to Mansard’s risk-adjusted capitalisation, A.M. Best notes this is strongly supported by a large capital base, and although it is expected to slightly decrease going forward, it will remain supportive of the company’s ratings. Mansard paid dividends of NGN 900 million (USD 4.4 million) in 2011 equating to a dividend pay ratio of 96.6%, and in A.M. Best’s opinion, this could negatively impact the company’s capitalisation growth. Moreover, Mansard implemented a prudent reserving approach and has an adequate enterprise risk management underpinned by a triple level governance structure.
Mansard’s overall underwriting operating performance is good; its return on capital and surplus during 2011 increased as well as its overall operating performance, which was driven by the strong performance of its non-life account, mainly composed of the motor business and oil and gas results. The company’s performance is expected to improve in 2012, and the provisions for outstanding premiums owned by debtors continue to have a low impact on overall performance, highlighting the company’s tight credit control policy.
In July 2012, Mansard changed its name from Guaranty Trust Assurance Plc due to the change in its ownership in 2011 and undertook a number of measures in order to manage its rebranding successfully. The company has a wide and effective distribution network, which benefits from its bancassurance agreement with GTBank and alliances with First City Monument Bank. Since Mansard’s leadership did not change, its growth strategy and focus on retail insurance remains intact. Moreover, during 2012, the company’s business volume has continued to grow.
Mansard’s investments in equities, managed funds and property represent approximately 40% of its total investments. Last year, the company expressed its intention of reducing its property investments starting in 2012; in fact, in February 2012, Mansard divested from its subsidiary. A.M. Best acknowledges the efforts made by the company to decrease the exposure to the property risk, although the proportion remains considerable, and in A.M. Best’s view, this could create the potential for volatility in Mansard’s risk-adjusted capitalisation and overall profits.
Going forward, A.M. Best expects Mansard to continue to maintain underwriting discipline as it expands as well as to pursue prudent reserving practices. Weaker than expected performance, particularly in relation its investment portfolio or significant erosion in its risk-adjusted capitalisation is likely to have a negative impact on the company’s ratings. Positive factors that could drive a rating movement are the reduction of concentration of assets in property, the maintenance of a good level of risk-adjusted capitalisation and a more sophisticated assessment of its probable maximum loss.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of Insurance Groups”; “Equity Credit for Hybrid Securities”; and “Evaluating Country Risk.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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