Johannesburg, 30 May 2014 — Global Credit Ratings has affirmed the national scale financial strength rating assigned to Clientèle Life Assurance Company Limited of A+(ZA); with the outlook accorded as Stable.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to Clientèle Life Assurance Company Limited (“Clientèle Life”) based on the following key criteria:
Clientèle Life’s rating is supported by a strong position and brand in the direct life market. The assurer’s long-established credentials and first to market advantage in chosen segments and channels demonstrate the assurer’s ability to innovate, while supporting longevity in the market. High levels of profitability have been sustained throughout the review period, registering a review period average operating margin and return on equity well in excess of industry norms. This has been supported by a well-managed cost structure, while key initiatives aimed at improving premium quality and stability may further enhance these metrics going forward.
CAR coverage remains strong, with excess capital above risk-based requirements supporting the rating. Despite reduced coverage at FYE13 (2.4x) relative to the historical average (3x), coverage remains comfortably above the assurer’s internal minimum level. Asset liability matching risk is considered to be well managed, given the upfront purchase of investments with terms and interest rates that match the liabilities associated with guaranteed investment business. The credit risk associated with these balances is considered to be low given the placement with highly rated South African counterparties.
A strong track record of strategic implementation, coupled with proactive steps taken to address key risk factors (including rising withdrawal rates), are reflective of strong strategic management and a high level of technical expertise. Experience assumptions are continually being revised, with management constantly monitoring claiming patterns. Clientèle Life is exposed to the fortunes of the lower end of the market, while its market position remains vulnerable in GCR’s opinion to increased competitive pressure.
An upward movement of the rating would be considered if a strengthening in market profile and diversification were to be evidenced, accompanied by the maintenance of strong capitalisation and earnings capacity. A downward movement may arise if substantial and sustained weakening in capitalisation levels was evidenced. This could also be triggered by a significant loss of market share or a sustained poor operating performance.
For a detailed glossary of terms utilised in this announcement please click here
NATIONAL SCALE RATINGS HISTORY
Initial rating (June/2006)
Financial strength: A+(ZA)
Last rating (May/2013)
Financial strength: A+(ZA)
Sector Head: Insurance
Sector Head: Financial Institutions
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Assurance Companies (July 2013)
Clientèle Life rating reports, 2006-2013.
RSA Life Assurance Bulletin 2013.
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/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; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
Clientèle Life Assurance Company 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 Clientèle Life Assurance Company Limited with no contestation of the rating.
The information received from Clientèle Life Assurance Company Limited and other reliable third parties to accord the credit rating(s) included the latest available audited annual financial statements to June 2013 (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements to June 2014, year to date management accounts to January 2014, the 2013 actuarial valuation report, the 2013 Embedded Value and Value of New Business report, LT statutory annual returns to June 2013, and other documentation related to the rating exercise.
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 Clientèle Life Assurance Company Limited’s rating of A+(ZA); Outlook Stable.