Johannesburg, 12 Feb 2015 — Global Credit Ratings has today assigned an initial national scale claims paying ability rating to Seguradora Internacional de Moçambique, SA of AA-(MZ); with the outlook accorded as Stable. The rating is valid until 30 September 2015.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating to Seguradora Internacional de Moçambique, SA (“SIM”) based on the following key criteria:
SIM’s position in the top tier of the life and non-life segments represents a key rating strength, with the company’s entrenched competitive profile supported by strong group relationships and brand strength.
SIM has maintained sound capital adequacy levels, which represents a core component of the insurer’s rating. The consolidated international solvency margin has consistently trended above 100% over the review period, while the insurer reflects robust statutory cover, which is expected to be maintained over the rating horizon. Asset quality is underpinned by a relatively conservative investment composition and limited exposure to market risk. Furthermore, asset-liability matching is viewed to be sound and is complemented by the prudent reserving approach and substantial free assets backing shareholders’ funds. Liquidity has been maintained at comfortable levels, and represents an important factor in the insurer’s rating.
GCR considers SIM’s consolidated earnings capacity to be strong and supportive of continued capital and reserve building. This is underpinned by a balanced product mix, as well cross-selling of short term and long term products. Treaty and facultative reinsurance is primarily placed with secure rated counterparties, while risk and event net retention levels are maintained at prudent levels.
The rating currently matches the national scale ceiling applicable to entities operating within the Mozambican insurance industry. Accordingly, an upgrade of the rating could potentially follow a strengthening of key industry factors. A sustained weakening in operating profitability and/or pronounced deterioration in key credit protection metrics could result in a downward rating adjustment.
NATIONAL SCALE RATINGS HISTORY
Initial / Last Rating (Feb/2015)
Claims paying ability: AA-(MZ)
Sector Head: Insurance
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Insurance Companies (Updated July 2014).
RATING LIMITATIONS AND DISCLAIMERS
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GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S INSURANCE GLOSSARY
|Assets||The items on the balance sheet of the insurer which show the book value of property owned. Under regulations, not all property or other resources may be admitted in the statement of the insurer. This gives rise to the term ‘non-admitted assets.’|
|Balance Sheet||An accounting term which refers to a listing of the assets, liabilities, and surplus of a company or individual as of a specific date.|
|Bond||A certificate issued by a government or corporation as evidence of a debt.|
|Facultative||Facultative reinsurance means reinsurance of individual risks by offer and acceptance wherein the reinsurer retains the “faculty” to accept or reject each risk offered.|
|Insurance||A formal social device for reducing risk by transferring the risks of several individual entities to an insurer.|
|Insured||A person or organisation covered by an insurance policy.|
|Insurer||The party to the insurance contract whom promises to pay losses or benefits.|
|Interest||Money paid for the use of money.|
|Liquidity||The ability of an insurer to convert its assets into cash to pay claims if necessary.|
|Loss||The happening of the event for which insurance pays.|
|Market Risk||A risk experienced by those who invest in securities which is the risk of possible loss of investment since there are no guarantees associated with such investments.|
|Policyholder||The person in actual possession of an insurance policy.|
|Reinsurance||The practice whereby one party, called the Reinsurer, in consideration of a premium paid to him agrees to indemnify another party, called the Reinsured, for part or all of the liability assumed by the latter party under a policy or policies of insurance, which it has issued.|
|Reserve||An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders.|
|Retention||The net amount of risk the ceding company keeps for its own account|
|Risk||Uncertainty as to the outcome of an event when two or more possibilities exist.|
|Securities||Evidences of a debt or of ownership, as stocks, bonds, and checks.|
|Solvency||With regard to insurers, having sufficient assets (capital, surplus, reserves) and being able to satisfy financial requirements (investments, annual reports, examinations) to be eligible to transact insurance business and meet liabilities.|
|Statutory||Required by or having to do with law or statute.|
|Surplus||The excess of assets over liabilities.|
|Treaty||A general reinsurance agreement which is obligatory between the ceding company and the reinsurer containing the contractual terms applying to the reinsurance of some class or classes of business, in contrast to a reinsurance agreement covering an individual risk.|
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
Seguradora Internacional de Moçambique, SA participated in the rating process via face-to-face management meetings and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Seguradora Internacional de Moçambique, SA with no contestation of the rating.
The information received from Seguradora Internacional de Moçambique, SA and other reliable third parties to accord the credit rating(s) included the latest available audited annual financial statements to December 2013 (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements to December 2014, most recent year to date management accounts to September 2014, the 2015 reinsurance cover notes, the asset liability matching schedule as at December 2013 and other relevant documents.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
GCR accords an initial rating of AA-(MZ) to Seguradora Internacional de Moçambique, SA; Outlook Stable.