Johannesburg, 5 Sep 2014 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to ICEA LION General Insurance Company Limited of AA-(KE); with the outlook accorded as Stable. The rating(s) are valid until 08/2015.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to ICEA LION General Insurance Company Limited (“ICEA LION General”) based on the following key criteria:
Effective 1 January 2012, Insurance Company of East Africa Limited (“ICEA”) and Lion of Kenya Insurance Company Limited (“Lion”) merged to form the enlarged ICEA LION Group. Through this, ICEA LION Life Assurance Company Limited evolved as a dedicated life assurer, while Lion acquired ICEA’s general business (with no take-on of its share capital) to form ICEA LION General.
GCR views capital adequacy as strong relative to ICEA LION General’s risk profile, and supportive of the insurer’s short to medium term strategy. As at FYE13, the insurer reflected international solvency of 107% and regulatory solvency coverage of 5.6x. The insurer’s underwriting profitability track record has evidenced a high degree of stability over the last four years, with competitive margins registered. In this regard, the effective bedding down of the ICEA risk pool over the past two years, whilst maintaining internal risk management benchmarks represents a key measure of management’s strategic implementation capacity. Strong earnings streams are expected to be sustained going forward, which is considered a rating strength. Further, ICEA LION General’s business profile reflects a strong level of competitive positioning (5th largest in the industry), supported by a strong brand franchise and established market presence.
The rating is also supported by the insurer’s adequate liquidity profile relative to industry norms, whilst investment risk is considered low to moderate. The reinsurance programme utilises counterparties of good credit quality, with the vast majority being well rated on an international scale. Additionally, maximum net deductibles per risk and event are limited to levels that are viewed as conservative. Note was, however, taken of the elevated level of concentration risk in the net portfolio, given the relatively high weighting of motor in the risk base.
The rating could benefit from a demonstrated ability to significantly enhance its market position over the medium term, coupled with enhanced earnings diversification, while maintaining a stable and profitable underwriting track record. This must be accompanied by risk appropriate solvency levels (with a stringent capital management policy) and a stronger liquidity profile. A downward rating movement may arise if a substantial or sustained weakening in capitalisation levels was evidenced. This could also be triggered by a significant loss in market share or a sustained poor operating performance.
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NATIONAL SCALE RATINGS HISTORY
Initial rating (Oct/2000)
Claims paying ability: A+(KE)
Last rating (Aug/2013)
Claims paying ability: AA-(KE)
Sector Head: Insurance
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Insurance Companies (Updated July 2014)
ICEA LION General Insurance Company Limited rating report 2012-2013.
Lion of Kenya Insurance Company Limited and Insurance Company of East Africa Limited rating reports 2000-2011.
RATING LIMITATIONS AND DISCLAIMERS
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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.
ICEA LION General Insurance 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 ICEA LION General Insurance Company Limited with no contestation of the rating.
The information received from ICEA LION General Insurance Company Limited and other reliable third parties to accord the credit rating(s) included the latest available audited annual financial statements for 2013 (plus four years of comparative numbers), full year detailed budgeted financial statements for 2014, year to date management accounts to June 2014, the 2014 reinsurance cover notes, the 2013 Financial Condition Report, risk management processes/framework 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 ICEA LION General Insurance Company Limited’s rating of AA-(KE); Outlook Stable.