Johannesburg, 08 Oct 2013 — Global Credit Ratings has today affirmed the national scale financial strength rating assigned to African Life Assurance (Tanzania) Limited of A+(TZ); with the outlook accorded as Positive. The rating(s) are valid until 9/2014.
Global Credit Ratings has accorded the above credit rating(s) on African Life Assurance (Tanzania) Limited based on the following key criteria:
African Life Assurance (Tanzania) Limited (“African Life”) was established in 2005 as the only Tanzanian assurer with a pure life licence. The assurer is 64% owned by South African based Sanlam Limited (“Sanlam”), with the balance (36%) held by Tanzanian investors.
The rating decision took cognisance of African Life’s established position as the dominant player in the domestic life assurance market (47% market share), as well as its affiliation with majority shareholder (Sanlam), from which it derives significant operational and technical support. In addition, the assurer’s demonstrated ability to register sound operating profits was favourably considered, buoyed by relatively well contained (albeit upward trending) claims. However, despite improved cost efficiencies, delivery costs remained elevated relative to risk premiums in F12, with further cost rigor required to maintain sound profitability going forward. Bolstered by a sustained strong degree of capital accumulation, key solvency metrics have been maintained at comfortable levels over the review period, whilst capital adequacy remains sound relative to internal benchmarks. Furthermore, the independent actuarial report for 1H F13 highlights the maintenance of the Embedded Value and the Value of New Business at healthy levels. Further comfort is derived from the conservative investment strategy, which is supportive of sound key liquidity metrics, whilst assets-liability matching is considered adequate. In addition, reinsurance protection is considered adequate, as placements largely pertain to secure rated counterparties, whilst per risk net deductibles remain well contained relative to FYE12 capital. Note is also taken of the recent introduction of catastrophic reinsurance cover into the treaty framework (by means of a dedicated group XoL treaty), limiting the assurer’s largest exposure per event to a moderate level (1.6% of FYE12 capital). The business mix remains geared to group life business (in particular credit life risks). Coupled with increased reliance on a few select bancassurance partners in terms of business procurement (single largest: 40% of GWP), this implies heightened operational risk.
An upward revision of the rating is subject to the assurer sustaining excess capital reserves and solvency metrics at current levels (amidst reasonably contained dividend disciplines). Conversely, a deterioration in operating performance over a prolonged period, coupled with a sustained weakening of capital and solvency metrics could impact adversely on the rating. In addition, the adoption of an increasingly aggressive investment strategy (thereby exacerbating investment and capital risk) could exert downward rating pressure.
NATIONAL SCALE RATINGS HISTORY
Initial rating (Apr/2010)
Financial Strength: A+(TZ)
Last rating (Sep/2012)
Financial Strength: A+(TZ)
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Sector Head: Insurance
+27 11 784 1771
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
GCR’s Criteria for Rating Life Assurance Companies
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.
African Life Assurance (Tanzania) Limited participated in the rating process via face-to-face management meetings, teleconferences 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 African Life Assurance (Tanzania) Limited with no contestation of the rating.
The information received from African Life Assurance (Tanzania) Limited and other reliable third parties to accord the credit rating included 2012 audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year 2013 detailed budgeted financial statements, unaudited year to date management accounts to 30 June 2013, 2013 reinsurance cover notes, actuarial valuation statement as at 30 June 2013, capital management policy and other non-public statistical information.