Announcements

GCR affirms General Alliance Insurance Limited’s rating of A+(MW); Outlook Stable

Johannesburg, 31 August 2015 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to General Alliance Insurance Limited of A+(MW), with the outlook accorded as Stable. The rating is valid until August 2016.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating to General Alliance Insurance Limited (“GA Malawi”) based on the following key criteria:

Capital adequacy has been measured at very strong levels, and represents a core component of the insurer’s rating. GA Malawi continues to evidence strong solvency metrics, with a somewhat conservative dividend strategy. GCR expects capital adequacy to remain strong going forward.

Profitability has been measured at robust levels on both underwriting and net levels, contributing favourably to the rating. GA Malawi’s highly competitive technical profitability and contained expense base has allowed for the attainment of profit metrics well in excess of peer and industry averages. Earnings capacity is expected to persist at very strong levels over the rating horizon. In addition, risk premiums are fairly well diversified, with three lines of business producing material volumes of net premium income. Material reinsurance counterparties evidence a strong aggregate level of counterparty strength, whilst net deductibles per risk and event are limited to levels viewed by GCR to be conservative.

GA Malawi has evidenced strong liquidity metrics over the review period. This has been underpinned by strong operational cash generation, coupled with a conservative asset allocation strategy. Liquidity metrics are expected to be sustained at strong levels going forward. Asset quality is viewed to evidence a moderate level of exposure, with risk financial assets corresponding to approximately 52% of capital. The listed nature of the bulk of financial assets serves to augment liquidity somewhat.

The insurer’s position as an established player in the domestic non-life insurance market lends support to the rating, with participation on sizeable corporate risks in recent years enhancing the insurer’s business profile and entrenching market share.

Upward rating movement may be derived over the medium term from enhanced market positioning relative to peers, a sustained strengthening in key liquidity metrics, and/or increased development and penetration of the local industry. Downward rating pressure could emanate from a weakened level of competitive positioning, a reduction in capital strength relative to risk factors, a convergence of profit metrics with industry norms, and a material weakening in liquidity and/or asset quality.

NATIONAL SCALE RATINGS HISTORY
 
Initial rating (May 2008)
Claims paying ability: A+(MW)
Outlook: Stable
 
Last rating (August 2014)
Claims paying ability: A+(MW)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst   Secondary Analyst
Marc Chadwick   Catherine Zimba
Sector Head: Insurance Ratings   Junior Credit Analyst
(011) 784-1771   (011) 784-1771
chadwick@globalratings.net   catherinez@globalratings.net
     
Committee Chairperson    
Sheri Few    
Senior Credit Analyst    
(011) 784-1771    
few@globalratings.net    

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Short Term Insurance Companies, updated July 2015

General Alliance Insurance Limited rating reports, 2008-2014

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.

General Alliance Insurance 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 has been disclosed to General Alliance Insurance Limited with no contestation of the rating.

The information received from General Alliance Insurance Limited and other reliable third parties to accord the credit rating included:

  • The 2014 audited annual financial statements
  • 4 years of comparative audited numbers
  • Unaudited interim results as at 30 June 2015
  • Budgeted financial statements for 2015
  • Other related documents.

The rating above was solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the rating.


GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S INSURANCE GLOSSARY

Assets The items on the balance sheet of the insurer which show the book value of property owned. Under regulations, not all property or other resources may be admitted in the statement of the insurer. This gives rise to the term ‘non-admitted assets.’
Balance Sheet An accounting term which refers to a listing of the assets, liabilities, and surplus of a company or individual as of a specific date.
Capacity The largest amount of insurance or reinsurance available from a company. In a broader sense, it can refer to the largest amount of insurance or reinsurance available in the marketplace.
Claim A request for payment of a loss, which may come under the terms of an insurance contract.
Commission A certain percentage of premiums produced that is received or paid out as compensation by an insurer to agents and brokers.
Insurer The party to the insurance contract whom promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.
Interest Money paid for the use of money.
Liquidity The ability of an insurer to convert its assets into cash to pay claims if necessary.
Loss Ratio The ratio of claims to premiums. It may be calculated in several different ways, using paid premiums or earned premiums, and using paid claims with or without changes in claim reserves and with or without changes in active life reserves.
Policy The legal document issued by the company to the policyholder, which outlines the conditions and terms of the insurance also called the policy contract or the contract.
Premium The price of insurance protection for a specified risk for a specified period of time.
Reinsurance The practice whereby one party, called the Reinsurer, in consideration of a premium paid to him agrees to indemnify another party, called the Reinsured, for part or all of the liability assumed by the latter party under a policy or policies of insurance, which it has issued. The reinsured may be referred to as the Original or Primary Insurer, or Direct Writing Company, or the Ceding Company.
Reserve An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders.
Retention The net amount of risk the ceding company keeps for its own account
Risk Uncertainty as to the outcome of an event when two or more possibilities exist.
Solvency With regard to insurers, having sufficient assets (capital, surplus, reserves) and being able to satisfy financial requirements (investments, annual reports, examinations) to be eligible to transact insurance business and meet liabilities.
Statutory Required by or having to do with law or statute.
Underwriting The process of selecting risks and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.

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

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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.

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