LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb” (Fair) of Seguradora Internacional de Moçambique, S.A. (SIM) (Mozambique). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect SIM’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management (ERM).
SIM’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), at year-end 2020. Capital consumption is driven primarily by asset risk arising from the company’s concentrated investment portfolio that is weighted toward domestic fixed income securities and real estate. The balance sheet strength assessment also factors in the company’s strong liquidity and prudent reserving. A partially offsetting factor is SIM’s moderate dependence on reinsurance, although the associated credit risk is managed through the use of a stable reinsurance panel of solid credit quality.
SIM has a track record of solid and stable underwriting results, in spite of challenging market conditions, as demonstrated by a five-year (2016-2020) weighted average combined ratio and return on equity of 70.4% and 24.5%, respectively. In 2020, the company’s operating performance remained strong, with a net profit before tax of MZN 1.0 billion (USD 13.5 million), despite lower economic activity and challenging market conditions as a result of the COVID-19 pandemic. SIM’s strong operating performance is supported by a good balance of earnings between underwriting and investment income.
SIM maintains a solid competitive position in its domestic market as the third-largest insurer in terms of gross written premium. However, the company’s profile is limited to Mozambique, which exposes it to very high levels of economic, political, and financial system risk. This presents challenges for the company, although AM Best expects these risks to be mitigated partly by the company’s strong market position and evolving ERM practices.
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