Credit Rating Reports – GCR Ratings

PSG Financial Services Limited (Sep 2023)

PSG Financial Services Limited (PSG Financial Services, previously PSG Konsult Limited) is a South African based financial services group, consistently generating approximately 93% of its revenue base from South African based entities. The PSG Financial Services group delivers its services and products by way of three operating divisions, namely PSG Wealth, PSG Asset Management and PSG Insure, with its offering focused on individuals and enterprises in South Africa as well as Namibia.

PSG Financial Services is a publicly listed company, which was previously majority owned by PSG Group Limited until it was unbundled in September 2022, resulting in a diverse shareholder base consisting of over 18,870 counterparties as of February 2023. Of the total, directors held 20% of shares in issue, with the Public Investment Corporation (including the Government Employees’ Pension Fund’s interest), Coronation Asset Management and Allay Gray collectively accounting for a further 37%.

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South African Funds Peer Comparison (Sep 2023)

At the time of publication, GCR rated approximately ZAR426 billion of the combined South African short-term interest bearing and money market funds (by funds under management). This segment represents 15.5% of the total South African funds industry (by assets under management) and 50% of South African interest-bearing funds as at 31 March 2023. The following report provides a peer comparison of rated funds, including a snapshot of the ratings factors and some other market related information.
Outlined below is a breakdown of the rated funds using the major components of the Criteria for Fund Ratings, which can be found on the GCR website. Fund ratings (f) are not credit ratings. Therefore, they do not measure the relative ability of a fund to repay principal and/or interest in a timely manner. Rather, Fund ratings indicate an opinion regarding the fund’s ability to preserve the principal value under varying market conditions which may be affected by credit risk, interest rates, and liquidity, as well as other market conditions. The report does not focus on fund performance.

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Wema Bank Plc (Sept 2023)

Wema Bank’s funding and liquidity assessment is a positive rating factor, supported by a relatively stable funding structure and adequate liquidity coverage. As of December 2022, customer deposits registered at NGN1.2 trillion ($2.6 Billion) representing a 25.7% growth over the prior year, largely underpinned by the Bank’s retail penetration. Customer deposits accounted for 92.9% of the funding base as of December 2022 (December 2021: 89.1%) and were largely (52.9%) in low-cost current and savings deposits (December 2021: 42.7%), translating into a moderate cost of funds of 4.2%.

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Letshego Namibia (Sep 2023)

The ratings on Windhoek based Letshego Bank Namibia Limited (LBN or the bank), Letshego Micro Financial Services (Namibia) (Pty) Limited (LMFSN) and Letshego Holdings Namibia Limited (LHN) reflect the strengths and weaknesses of the group.

LBN provides banking services to Namibian residents while LMFSN provides short to medium-term unsecured consumer advances to salaried employees of the public and private sectors. LHN is a non-operating holding company at the apex of the group, providing funding and strategic oversight.

In GCR’s opinion, both LMFSN and LBN operate functions without which will irreparably damage the group/parent franchise. However, in the event the level of importance of either LBN or LMFSN reduces or is viewed weaker, the ratings may be de-linked from the group ACE/ group credit profile. LHN is the holding company of the Namibia Group and operates exclusively in Namibia through its wholly owned subsidiaries LBN and LMFSN. Botswana based Letshego Holdings Limited (LHL) owns 78.46% of LHN, with the remainder being held by private investors and individuals.

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Lewis Group Limited (Sep 2023)

Lewis Group Limited (Lewis or the group) is one of South Africa’s leading household furniture and electrical appliance retailers in the lower to middle income market. The group houses four trading brands including Lewis, Beares, Best Home & Electric (BH&E) and UFO, offering its customers both cash and credit sale platforms. Listed on the JSE since 2004, Lewis predominantly operates in South Africa, with a small presence in neighbouring countries. Merchandise sales are supported by the consumer finance division, with credit protection offered through Monarch Insurance, the group’s insurance subsidiary.

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Lasaco Assurance Plc (Sept 2023)

Lasaco's earnings increased considerably in 2022, with net profit after tax registering at a review period high of NGN1.5 billion in 2022 (2021: NGN261 million), which translated to returns on revenue and assets of 14.8% and 1.5% respectively in 2022 (2021: 2.9% and 0.3% respectively). This growth was largely driven by increased premium retention and a relatively lower claims payment during the year. Also supporting earnings in 2022, was better yields on the investment portfolio; therefore, total investment yields strengthened to 8.3% in 2022 (2021: 6.6%).

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Rand Merchant Bank Nigeria Limited (Sept 2023)

RMBN’s risk position is sound and positive to the rating. As of 31 December 2022, gross loans registered at NGN107.2Billion ($239.0 Million) representing a considerable 69.0% growth over the prior year. This growth was largely driven by the extension of additional loans to existing obligors following a change in the single obligor limit (SOL) regulation at the Group level. Sectorial concentration remains high, with the manufacturing and transport and communication sectors accounting for 49.8%, and 29.4% of gross loans respectively as at 31 December 2022.

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Fedhealth Medical Scheme (Sep 2023)

Fedhealth was established as an open medical scheme. The scheme is administered by Medscheme. The scheme’s products are categorised into three ranges, which include the low cost option, MyFed. The product ranges cater for market segments at different life stages from comprehensive options like Maxifed, for conservative and sicker members to affordable options such as Flexifed, for young and healthy members.

Fedhealth continues to focus on balancing affordability with reserve utilisation, aiming to grow the membership base without adversely impacting the financial sustainability of the scheme. This is accompanied by various claims control measures including tariff negotiation. The scheme aims to continue to enhance its products to attract and retain members, with the growth strategy tilted towards the lower cost options. The scheme has maintained a strong financial profile, characterised by a very strong solvency margin and broadly positive operational cash flow generation.

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Old Mutual Short-Term Insurance (Botswana) Limited (Sep 2023)

Old Mutual Short-Term Insurance (Botswana) Limited (Old Mutual ST Botswana) started operating in 1994 and is 100% owned by Old Mutual Limited (the group) through Old Mutual Financial Services Botswana (Pty) Ltd, an intermediate non-operating holding company. Old Mutual Financial Services Botswana (Pty) Ltd also holds exclusive interests in Old Mutual Life Insurance Company (Botswana) (Pty) Ltd (Old Mutual Life Botswana) and Old Mutual Investment Group Botswana Proprietary Limited. The three Botswana domiciled subsidiaries form a strategically significant corporate structure under one parent, although the financials for Old Mutual ST Botswana are consolidated at group level. Given the limited contribution of Old Mutual ST Botswana to the group’s revenue and total assets of less than 1% for each category, the entity’s credit profile is assessed on a stand-alone basis with consideration for group support.

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Bryte Insurance Company Limited (Sep 2023)

Bryte Insurance Company Limited (Bryte Insurance) is effectively a wholly owned subsidiary of Bryte Africa Group Limited (BAGL or Bryte group), which has a direct shareholding of 49% and a further 51% through Bryte Holdings South Africa (BH). BAGL is ultimately a 100% owned subsidiary of Fairfax Financial Holdings Limited (Fairfax). A Black Economic Empowerment transaction was concluded in February 2019 resulting in the transfer of 49% of BH’s economic and voting rights to Maharishi Institute (MI)/ The Invincible Distribution Partners Trust. This effectively resulted in a 24.99% cession of economic and voting rights in Bryte Insurance (with no share transfer) to MI. MI receives dividends to support non-profit education initiatives.

The Bryte group comprises Bryte Insurance, Bryte Life Company and Bryte Risk Services Botswana. All the subsidiaries are effectively 100% owned. The nearest available financial consolidation is into Fairfax, and Bryte group is very small within the broader group. As a result, a standalone analysis was conducted, although potential for risks stemming from the broader BAGL group were considered.

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