Africa Update: Global Credit Ratings downgrades UAP Insurance South Sudan

Article Update: Top Ten Cost Every Nigerian Business Must Incur
September 15, 2017
Africa Update: S&P Dow Jones Indices expands African index family
September 15, 2017

Africa Update: Global Credit Ratings downgrades UAP Insurance South Sudan

Accounting.

Global Credit Ratings (GCR) has downgraded UAP Insurance South Sudan and accorded it a negative outlook.

The South African-based agency cited worse than anticipated performance negatively impacted by the uncertain economic and political environment.
This is in contrast to stable outlooks accorded to UAP Insurance Kenya and Uganda by the agency in July.

The wholly-owned subsidiary of UAP Holdings commenced its South Sudan operations in February 2006 in Nairobi before moving to Juba in July of the same year.

GCR said in a statement it had downgraded the national scale claims paying ability rating assigned to the insurer to BBB-(SS) from BBB+(SS), with outlook accorded as negative. The new rating is valid until August, 2018.

“There is, therefore, a higher risk that the payback period of sizeable loans to the subsidiary, which are subordinated to external loans, could be prolonged beyond the short term nature of predominant liabilities,” said GCR.

 “However, note is taken of the partial offsetting effect of the implied support framework offered by UAP Old Mutual Ltd, which GCR believes has potential to absorb medium term shocks and limit the full realisation of downside risks.”

The agency said despite high nominal solvency, capitalisation is negatively impacted by elevated exposure to high risk assets.

The international solvency margin measured at a high 131 per cent in 2016 compared to 102 per cent in 2015, reflecting relatively low underwriting risk for the South Sudan business. GCR said it views this to present significant balance sheet risk.

In July, GCR affirmed the positive claims paying abilities of UAP Kenya and Uganda with an AA-(KE) and A+(UG) ratings respectively.

Comments are closed.