Fitch Downgrades Nova Sociedade de Seguros de Angola's IFS to 'B'; Outlook Negative
KEY RATING DRIVERS
Nossa's rating is capped by the Local Currency Issuer Default Rating of Angola. This reflects the insurer's exposure to the weakening operating environment and to sovereign and domestic bank obligations. On a standalone basis, Nossa's small size and scale is offset by supportive capitalisation, sound profitability, an established franchise and a clear operating strategy.
The Angolan economy has weakened as oil prices have remained depressed so far in 2016. Fitch believes low economic growth and high inflation are the biggest obstacles to Nossa's growth strategy in the near term.
Nossa is the fifth-largest insurer in Angola by gross written premium (GWP), but is small in absolute terms (2015 GWP approximately USD41m based on year-end exchange rate). Its business mix is concentrated, with motor business accounting for the largest proportion of GWP, but it has successfully started to diversify into life and other non-life lines.
A sustained weak operating environment, indicated by a sovereign downgrade, would result in a downgrade. Conversely, a revision of the sovereign Rating Outlook to Stable could result in a similar action for Nossa.
A downgrade could also result from a failure by Nossa to successfully implement its growth strategy, indicated by a sustained inflation-adjusted decline in gross premiums or a significant decline in profitability.lity.