Global Credit Rat­ings down­grades UAP In­surance South Su­dan

Business Daily (Kenya) - - MONEY & MARKETS - James Ngun­jiri Ngun­jirij@ke.na­tion­media.com

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.

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