Johannesburg, 11 Sep 2013 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to ICEA LION General Insurance Company Ltd of AA-(KE); with the outlook accorded as Stable. The rating(s) are valid until 8/2014.
Global Credit Ratings has accorded the above credit rating(s) on ICEA LION General Insurance Company Ltd 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”) finalised their merger, in the process creating the broader ICEA LION Group. A key element of the consolidation has been the establishment of separate life and non-life insurance companies. Specifically, ICEA LION Life Assurance Company has evolved as a dedicated life assurer, while ICEA LION General Insurance Company (“ICEA LION General”) will focus on short term insurance business. The insurer is an 80% owned subsidiary of First Chartered Securities Limited, with Kenya Holdings Limited accounting for the remaining 20%.
The rating was supported by ICEA LION General’s favourable position as one of the larger short term insurers in Kenya, underpinned by long standing client relationships and strong brand value. Furthermore, key solvency metrics are considered sound and supportive of the insurer’s medium term business plan. While combined property holdings represented an elevated 124% of FYE12 shareholders interest, the recent sale of ICEA LION General’s associate property company is expected to see capital and liquidity risk abate. In this regard, cash and equivalents are projected at KShs3.2bn at FYE13 (around 50% of invested assets from 31%), translating to comfortable claims cash coverage of 25 months (F12: 20 months). The comprehensive reinsurance programme is negotiated at a company level, and is led by highly rated counterparties. Maximum net retention per risk and event on XOL amounts to KShs10m for F13, or 0.4% of capital. Ongoing refinement and oversight of underwriting protocols has served to support loss ratios well below industry norms. This underpinned robust underwriting profits in F12, which are expected to be maintained going forward. While initiatives to diversify the premium base are favourably viewed, class concentration to motor is expected to remain elevated over the medium term.
A demonstrated ability to meaningfully enhance its market position over the medium term, while maintaining sound underwriting margins, and without compromising key solvency and liquidity metrics could positively impact the rating. Conversely, downward rating action could follow a pronounced weakening in international solvency below the level forecast for F13 and F14. In this regard, GCR would not expect international solvency to fall below 80% to retain the current rating. Further, a weakening of key liquidity metrics below existing levels may impact adversely on the rating status.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Dec/2010)|
|Claims paying ability: A+(KE)|
|Last rating (Aug/2012)|
|Claims paying ability: AA-(KE)|
|Sector Head: Insurance|
|+27 11 784 1771|
|Regional Sector Head: Insurance|
|+27 11 784 1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
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.
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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 Ltd 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 Ltd with no contestation of the rating.
The information received from ICEA LION General Insurance Company Ltd and other reliable third parties to accord the credit rating included the 2012 audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, unaudited year to date management accounts to 30 June 2013, the current year reinsurance cover notes, debtors provisioning policy document, ERM processes/framework (including catastrophe management framework), reserving methodologies, capital management policy.