Announcements

GCR affirms CfC Life Assurance Limited’s rating of A+(KE); outlook Stable

Johannesburg, 29 July 2014 — Global Credit Ratings (“GCR”) has today affirmed the national scale financial strength rating assigned to CfC Life Assurance Limited (“CfC Life”) of A+(KE); with the outlook accorded as Stable. The rating(s) are vaild until 06/2015.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit rating(s) on CFC Life Assurance based on the following key criteria:

CfC is a wholly-owned subsidiary of Liberty Kenya Holdings Limited (“LKHL”), which reflected a market capitalisation of US$107.3m as at 21 July 2014. As part of the strategic realignment of the group, insurance activities were deconsolidated in F12, resulting in the registering of CfC Life as a pure life assurer and the establishment of The Heritage Insurance Company Kenya Limited (“Heritage”) as a dedicated short term insurance business.

The direct affiliation with strongly rated Liberty Holdings Limited and Standard Bank Group Limited as ultimate majority shareholders in the business continues to enhance the corporate profile, whilst the on-going operational and technical support provided fosters robust underwriting disciplines. Furthermore, risk management disciplines are notably enhanced by an enterprise risk management framework (developed in assistance with Liberty South Africa), which is viewed to contribute towards financial stability and the business’s strong capital management.

The size of the investment portfolio and well balanced asset mix therein is supportive of adequate asset-liability matching. Reflective of this, invested assets backing life operations covered the life fund by a sound 1.1x, whilst deposit administration liabilities are underpinned largely by government securities with varying maturity profiles. Moreover, post the business deconsolidation, CfC Life registered healthy net surpluses over the past two years, underpinned by a sustained strong operating performance (and in particular favourable claims experience). Nonetheless, compared to its peers the assurer’s cost base remains notably elevated, with improved cost efficiencies deemed imperative to sustain profitability at a competitive level going forward.

Note is taken of the revision of accounting principles during F13, which resulted in a comprehensive revaluation of various balance sheet positions year-on-year. Attesting to the impact thereof, statutory solvency eased slightly in F13, albeit remaining at a comfortable level, whilst CAR coverage equated to 1.75x in F13. In GCR’s view, CAR coverage approximating management’s internal benchmark of 2x is reflective of appropriate capital strength. The historic focus on individual life business remains a limiting factor in the attainment of critical mass, thus inhibiting scale efficiency benefits. Whilst on-going efforts to diversify into group life risks are positively viewed, given the strong competitive dynamics and slow conversion rate associated with this type of business, the risk premium base is likely to remain subdued relative to its peers over the short to medium term.

An increased level of market penetration (particularly within the group life space), coupled with the maintaining of key credit protection metrics at current levels could give rise to an upward rating adjustment over the medium term. Conversely, a sustained weakening in the assurer’s financial profile (with key credit protection metrics softening markedly against historic norms) could impact negatively on the rating. Exemplary of this, a protracted deterioration in CAR coverage well below the current comfort level would be negatively viewed.

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

NATIONAL SCALE RATINGS HISTORY
Initial rating (May/2013)
Financial strength: A+(KE)
Outlook: Stable

Last rating (May/2013)
Financial strength: A+(KE)
Outlook: Stable

ANALYTICAL CONTACTS
Primary Analyst
Benjamin Schmidt
Senior Credit Analyst
+27 11 784 1771 schmidt@globalratings.net

Committee Chairperson
Marc Chadwick
Sector Head: Insurance
+27 11 784 1771 chadwick@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Life Assurance Companies (July 2013)
CfC Life Assurance Limited rating report 2013.
The Heritage Insurance Company Kenya Limited (“Heritage”) rating reports 2000-2014.

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/RATING-SCALES-DEFINITIONS . 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.

CFC Life Assurance 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 CFC Life Assurance with no contestation of the rating.

The information received from CfC Life Assurance and other reliable third parties to accord the credit rating included the audited annual financial statements for F13 (plus four years of comparative numbers), latest internal and/or external report to management, full year F14 detailed budgeted financial statements, reinsurance cover notes for 2014 and most recent year-to-date management accounts to 31 March 2014. In addition, information specific to the rated entity and/or industry was also received.

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.

image_pdfPDF View

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.