Announcements

GCR affirms APA Life Assurance Limited’s rating of BBB+(KE); Outlook Stable.

Johannesburg, 27 Oct 2014 — Global Credit Ratings has today affirmed the national scale financial strength rating assigned to APA Life Assurance Limited of BBB+(KE); with the outlook accorded as Stable. The rating(s) are valid until 09/2015.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to APA Life Assurance Limited (“APA Life”) based on the following key criteria:

In line with the group’s strategy to enhance the insurance franchise under a single brand, the assurer’s name was changed in November 2013 to APA Life from Apollo Life Assurance Limited. APA Life is wholly owned by Apollo Investments Ltd, which also has controlling stakes in APA Insurance Ltd and Apollo Asset Management Co. Ltd. Recently in October 2014, Leapfrog (a micro insurance investment fund) sold its minority stake in Apollo Investments Ltd to Swiss Re Direct Investment Company Ltd (a subsidiary of the Swiss Re Group).

APA Life continues to reflect a constrained market profile. Positively, the recent revision of the company’s operational strategy bodes well for future business growth, evidenced by the strong revenue traction gained in F13 and for the year to date to June F14. The new growth strategy has also included a re-entrance into the individual life market (in November F13), as well as the integration of a new robust IT management system which allows for greater underwriting efficiencies and managerial oversight. The successful strategic execution in terms of delivering sustained growth and profitability represents a key rating consideration going forward.

Operating profitability in the life book has evidenced an improved trend over the past two years. Further, the pension portfolio continued to contribute positively to net earnings, although historic volatility in this book is noted. In this regard, steady scale enhancement and balanced asset management would need to be sustained to ensure a consistently robust bottom line. As such, following a sharp contraction in shareholders’ interest in F11, capital accumulation has since seen a steady recovery, underpinned largely by robust unrealised valuation gains and shareholder funding. Statutory solvency coverage continued to register above 3x at FYE13.

Cash and equivalents advanced to a sizable KShs1.4bn at FYE13 (doubling the balance relative to two years prior), supporting adequate liquidity coverage measures in the life book. APA Life’s exposure to capital market volatility is, however, considered elevated, with a high 42% of shareholder investments pertaining to listed shares.

Overall, the assurer’s technical risk management is viewed by GCR to be fairly limited. In this regard, a more risk-based approach to capital measurement and management should be reviewed in line with the continued development of the risk management framework (particularly in view of the company’s aggressive growth trajectory). Furthermore, a detailed actuarial assessment of asset-liability matching is yet to be undertaken.

An upgrade or a positive rating outlook could develop off a demonstrated ability to sustain a sound growth trajectory (translating to broader market penetration), achieved in conjunction with a stable earnings trajectory, sound capital adequacy, appropriate asset-liability matching and a more effective risk management framework. A sustained weakening in operating performance and net profitability could lead to a downward movement of the rating. Furthermore, capital erosion due to deteriorating asset quality thus impeding statutory coverage and capital adequacy, or inappropriate asset liability matching, may lead to a downgrade.

For a detailed glossary of terms utilised in this announcement please click here

NATIONAL SCALE RATINGS HISTORY

Initial rating (Nov/2009)
Financial strength: A-(KE)
Outlook: Stable

Last rating (Sep/2013)
Financial strength: BBB+(KE)
Outlook: Stable

ANALYTICAL CONTACTS
Primary Analyst
Sheri Few
Senior Analyst
(011) 784-1771
Few@globalratings.net

Committee Chairperson
Marc Chadwick
Sector Head: Insurance
(011) 784-1771
Chadwick@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Life Assurance Companies (updated July 2014)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.

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.

APA Life Assurance 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 APA Life Assurance Limited with no contestation of the rating.

The information received from APA Life Assurance Limited and other reliable third parties to accord the credit rating(s) included the 2013 audited annual financial statements (plus four years of comparative numbers), full year detailed budgeted financial statements for 2014, unaudited year to date management accounts to 30 June 2014, the 2014 reinsurance cover notes, the 2013 actuarial valuation statement, the 2013 Financial Condition Report, and other non-public statistical information on the company and/or industry.

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 affirms APA Life Assurance Limited’s rating of BBB+(KE); Outlook Stable.

image_pdf

Leave a Reply



ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2021 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.