Global Credit Ratings has accorded the above credit rating(s) on CfC Life Assurance Ltd based on the following key criteria:
Following a group restructuring during the latter half of 2010, CfC Life Assurance Limited (“CfC”) became a wholly-owned subsidiary of Liberty Kenya Holdings Ltd, which reflected a market capitalisation of US$70.6m at the end of July 2013. The company accounted for around 10% of total Kenyan life assurance premiums in 2012.
The rating takes cognisance of CfC’s direct affiliation with Liberty Holdings and Standard Bank Group Limited (by means of majority ownership), which both reflect sound international credit ratings. Paired with continued strong technical support (in particular from Liberty South Africa), this is expected to notably enhance the corporate profile of the assurer and provide a suitable platform for future growth. On the back of a recent deconsolidation at group level, the assurer’s operational structures were comprehensively revised in F12 to cater exclusively for life assurance business. Nevertheless, due to the historic focus on individual business, CfC continues to lack scale (relative to other more prominent market players). However, this is likely to improve over the medium term as the benefits of a recent realignment of its distribution strategy feed through. CfC exhibits a sound solvency position, with both the statutory solvency margin and the actuarial surplus recorded at comfortable levels. Further, CAR coverage was reported at 2.2x at FYE12, a level that GCR considers adequate and which meets management’s internal benchmark of 2x. In addition, note is taken of the de-risking of the investment portfolio in recent years. Attesting to the success of this, the assurer reflected a well balanced investment mix at FYE12, with the bulk of invested assets held in cash or low risk government securities. Moreover, investments backing life operations covered the life fund by an adequate 1.2x. On the operating line, the assurer has registered positive net results over the past few years, supported by a relatively stable claims experience. On a net line, however, earnings have evidenced some degree of volatility amidst fluctuations in fair value investment movements.
An upward adjustment of the rating could arise on the back of an increased level of market penetration, whilst sustaining credit protection metrics at similar levels. In contrast, a notable weakening in the assurer’s financial profile over the short to medium term, accompanied by a marked deterioration in key operational and solvency measures could result in a rating downgrade. Further, the adoption of a notably more aggressive investment strategy (thus unduly compromising asset-liability matching) could give rise to downward rating pressure.
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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.
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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.
CfC Life Assurance Ltd participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to CfC Life Assurance Ltd with no contestation of the rating.
The information received from CfC Life Assurance Ltd and other reliable third parties to accord the credit rating included the latest available audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, the current year reinsurance cover notes, actuarial valuation statement, debtors provisioning policy document, ERM processes/framework (including catastrophe management framework), reserving methodologies, capital management policy.