GCR says the banking arm's penetration of the commercial market allows for diversification in terms of product line and risk exposure. This notwithstanding continued reliance on the growth of the mortgage book constrains premium development.
Absa Insurance has displayed a well controlled capital management strategy throughout the review period, supported by an internal risk-based model that has been in place for a number of years. The international solvency margin is not forecast to reduce below 45%, which is supportive of the insurer's current rating.
GCR said the conservative investment strategy limits capital exposure to market volatility, while underpinning sound liquidity metrics. Capitalisation levels are also further supported by the low levels of risk retained for the insurer's net account, with all reinsurance counterparties displaying high credit quality.
Absa Insurance has forecast a single digit increase in gross written premium in 2012, underpinned by growth in the agricultural and motor warranty portfolios. The loss ratio is expected to register in line with historical averages, while the underwriting margin is projected to remain favourable, with the anticipated profitability underpinning solvency metrics for the current rating symbol.
