Announcements

GCR affirms Guardrisk Insurance Company Limited’s rating of AA(ZA); withdraws rating

Johannesburg, 31 October 2014 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Guardrisk Insurance Company Limited of AA(ZA); with the outlook accorded as Stable. At the same time, GCR has withdrawn the rating. The withdrawal of the credit rating of Guardrisk Insurance Company Limited is at the client’s request.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit rating(s) to Guardrisk Insurance Company Limited (“Guardrisk Insurance”) based on the following key criteria:

Guardrisk Insurance is a wholly owned subsidiary of Guardrisk Group (Pty) Limited, which is in turn 100% owned by MMI Holdings Limited (“MMI”). The MMI Group carries a national scale financial strength rating of AA+(ZA) and a national scale long term rating of AA(ZA).

The rating recognises Guardrisk Insurance’s leading position in the cell captive and alternative risk transfer segment, with a market share of approximately 56% of gross premiums. This is complemented by management’s high level of technical expertise within the cell captive arena.

The insurer has a long track record of profitability, supported by the stable and consistent fee income emanating from the premiums and assets under management. The insurer has maintained adequate levels of capitalisation, with statutory CAR registering at 1.4x as at June F15, while capital coverage of the internally calculated promoter capital requirement remained stable at approximately 1.3x. Given the inherent nature of the business model, Guardrisk is potentially exposed to credit risk relating to undercapitalised 3rd party cells. Note is, however, taken of the fact that the risk based internal solvency model makes allowance for the associated credit risk and potential capital strain.

NATIONAL SCALE RATINGS HISTORY

Initial rating (Oct/2000)
Claims paying ability: AA(ZA)
Outlook: Stable

Last rating (Mar/2014)
Claims paying ability: AA(ZA)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Susan Hawthorne
Analyst
(011) 784-1771
Susanh@globalratings.net

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

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Criteria for Rating Short Term Insurance and Reinsurance Companies, Updated July 2014
Criteria for Rating Cell Captive Insurers, 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; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

Guardrisk Insurance Company Limited participated in the rating process via 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 Guardrisk Insurance Company Limited with no contestation of the rating.

The information received from Guardrisk Insurance Company Limited and other reliable third parties to accord the credit rating(s) included the latest available unaudited management accounts to August 2014, the budgeted income statement to March 2015, the quarterly statutory CAR calculation to June 2014, documentation relating to the internal risk based capital requirement calculation to June 2014, the quantitative and qualitative statutory returns to March 2014 and other relevant documents.

The ratings above were not solicited by, or on behalf of, the rated client, and therefore, GCR has not been compensated for the provision of the ratings.

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

Insurance

A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to assume, to a specified extent, the losses suffered by the insured.

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.

Policyholder

The person in actual possession of an insurance policy.

Premises

The particular location of property or a portion thereof as designated in a policy.

Premium

The price of insurance protection for a specified risk for a specified period of time.

Risk

(1) Uncertainty as to the outcome of an event when two or more possibilities exist. (2) A person or thing insured.

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.

GCR affirms Guardrisk Insurance Company Limited’s rating of AA(ZA); withdraws rating

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