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The reinsurer’s risk adjusted capitalisation moderated on an inflation adjusted basis compared to historical levels. In this respect, the GCR Capital Adequacy Ratio (“CAR”) registered at 1.1x at FY20 (FY19: 1.7x), compared to levels above 2x observed between FY16 and FY18. The reduction was largely driven by elevated net monetary losses in FY19, occasioned by the hyperinflationary environment and a slower than anticipated recovery in FY20.
The Evolving Outlook, which is bidirectional and therefore demonstrates an equal likelihood of positive and negative rating actions, reflects the uncertainties presented by the operating environment which could result in earnings strain, negatively impacting risk adjusted capitalisation and liquidity. Reversion to a Stable Outlook may follow a sustained improvement in earnings and risk adjusted capitalisation. This will need to be supported by relative stability in the operating environment.