LONDON–(COMMERCIAL THREAD) –AM Best confirmed the financial strength rating of B (Fair) and the long-term issuer credit rating of “bb” (Fair) of Seguradora Internacional de Moçambique, SA (SIM) (Mozambique). The outlook for these credit ratings (ratings) is stable.
The ratings reflect the strength of SIM’s balance sheet, which AM Best considers strong, as well as its strong operational performance, limited business profile and marginal enterprise risk management (ERM).
The strength of SIM’s balance sheet is underpinned by its risk-adjusted capitalization at the highest level, as measured by Best’s capital adequacy ratio (BCAR), at the end of 2020. is weighted in favor domestic fixed income securities and real estate. The assessment of balance sheet strength also takes into account the company’s high liquidity and its prudent reserves. A partially compensating factor is SIM’s moderate reliance on reinsurance, although the associated credit risk is managed through the use of a stable reinsurance panel of strong credit quality.
SIM has a history of strong and stable underwriting results, despite difficult market conditions, as evidenced by a five-year weighted average combined ratio (2016-2020) and return on equity of 70.4% and 24.5 %, respectively. In 2020, the operational performance of the company remained strong, with a pre-tax net profit of MZN 1.0 billion (USD 13.5 million), despite weaker economic activity and difficult market conditions due to the COVID-19 pandemic. SIM’s strong operating performance is supported by a good income balance 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 premiums. However, the profile of the company is limited in Mozambique, which exposes it to very high levels of economic, political and financial risk. This presents challenges for the business, although AM Best expects these risks to be partially mitigated by the firm’s strong market position and evolving ERM practices.
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