AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of AXA Mansard Insurance Plc (AXA Mansard) (Nigeria). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect AXA Mansard’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect rating enhancement from AXA Mansard’s ultimate parent, AXA S.A. (AXA group).
AXA Mansard’s balance sheet strength is underpinned by risk-adjusted capitalisation that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital consumption is significantly influenced by the company’s real estate holdings, which in 2019 equated to 56% of capital and surplus. The company’s BCAR scores are expected to have improved for year-end 2020, driven largely by internal capital generation and limited growth in underwriting risk. The balance sheet strength assessment also considers AXA Mansard’s exposure to the high levels of economic, political and financial system risks that are associated with operating in Nigeria.
AXA Mansard’s adequate operating performance reflects its modest overall profitability combined with volatile underwriting performance, as demonstrated by its five-year (2015-2019) weighted average combined ratio of 105%, which ranged between 98 percent and 113 percent Historically, technical performance had been negatively impacted by the company’s high expense ratio, which exceeded 44 percent in the years 2015-2017. Overall operating profitability has been modest when factoring in local inflationary conditions, demonstrated by a five-year weighted average return-on-equity ratio of 11 percent supported by investment returns in excess of 9 perfect over the same period. AM Best expects AXA Mansard to generate a significantly improved result in 2020, with the company recording net income of NGN 5.7 billion (USD 14.7 million) for the first nine months of the year, a NGN 3.6 billion increase against the same period in 2019.
As AXA Mansard continues to execute its growth plan, AM Best expects the company’s prospective operating performance to benefit from a reduced expense ratio as a consequence of economies of scale.
AXA Mansard is a composite insurer concentrated in the Nigerian market. The company has an aggressive growth strategy within the health insurance line, which in 2018 led to it becoming a market leader in this segment. With support from the AXA group, AM Best expects the company to continue to evolve its risk management capabilities.