AM. Best Rating Services has released the independent analysis of Custodian and Allied Insurance Limited, with a pretty report for the Nigerian insurer with a bb+ Stable outlook in the current year.
The report it “reflects AM Best’s view that the balance sheet strength is expected to remain underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio(BCAR).” It also affirms that in the course of operations, “increasing capital requirements stemming from strong business growth are likely to be adequately supported by retained earnings, bolstered by the company’s robust underwriting profitability.”
The rating agency admitted that the company has excellent liquidity for its net insurance liabilities while it has moderate exposure to local equities and real estate, which account for approximately one-fifth of invested assets. Adjunct to this is the high reliance on reinsurance, primarily for the oil and energy line of business.
On the Custodian operating performance and improving overall earnings which significantly exceed inflation, the report linked it to robust underwriting profitability and investment income. Besides, the agency said this is expected to remain strong over the medium term.
Commenting on the Enterprise Risk Management, the report says “Internal risk management expertise has improved in recent years. There is an ongoing process of risk identification and monitoring through the use of specific risk management tools. An internal economic capital model has been developed and incorporated into the company’s strategic decision-making process.”
The good dose of good report dispenses good rates as it get into the fort of high economic, political and regulatory risk exposures. According to AM Best, these fault lines they “are expected to remain a significant challenge for the company’s risk management”.