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Genric’s earnings capacity strengthened over the past two years, with the underwriting margin improving to 11.5% in FY21 (FY20: 5.2%), compared to levels of below 1% over the prior three years. The improvement was driven by improved quality of risks that are underwritten following the introduction of new products and the cancellation of non-performing accounts. While we expect the improvement in underwriting performance to continue over the medium term, management’s ability to cement underwriting margins above the market average is a key rating consideration over the medium term.
The Positive Outlook captures prospects of a sustained improvement in the insurer’s earnings, with potential to sustain liquidity coverage above 2x and the regulatory Solvency Requirement(“SCR”) measuring in line with internal targets over the medium term, considering growth objectives. The business profile is expected to remain unchanged. An upward rating movement may follow a sustained improvement in earnings relative to the market, and/or increased prospects for the maintenance of liquidity metrics within the current range over the medium term, while risk adjusted capitalisation remains within a similar range.