Announcements

GCR affirms ICEA LION General Insurance Company (Tanzania) Limited’s rating of A(TZ); Outlook Stab

Johannesburg, 30 September 2016 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to ICEA LION General Insurance Company (Tanzania) Limited of A(TZ), with the outlook accorded as Stable. The rating is valid until September 2017.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating to ICEA LION General Insurance Company (Tanzania) Limited (“ICEA LION Tanzania”) based on the following key criteria:

ICEA LION Tanzania reflects strong risk adjusted capitalisation, underpinned by relatively well contained insurance and market risk exposures. In this respect, the international solvency margin equated to a high 131% at FYE15 (FYE14: 133%). Sound internal capital generation is likely to sustain risk adjusted capital adequacy within a healthy range over the rating horizon.

Liquidity metrics remained at strong levels over the review period. In this respect, the claims cash cover ratio and cash coverage of net technical liabilities remained high at 51 months and 1.5x at FYE15 respectively (FYE14: 58 months and 1.5x). GCR expects liquidity metrics to remain within a strong range over the rating horizon, supported by balanced asset allocation.

Sound earnings capacity is largely a function of healthy investment returns, offsetting constrained and volatile underwriting profitability. In this respect, the average operating margin equated to 12% over the review period (5-year u/w margin: -7%). Nevertheless, cognisance is taken of the fact that the insurer’s internal capital generation is highly susceptible to fair value movements. As such, management expects to turn around the underwriting trend, supported by improving scale efficiencies. GCR expects earnings capacity to remain within a sound level over the rating horizon, albeit with potential net profit volatility.

Material reinsurance counterparties evidence a moderately strong aggregate level of counterparty strength. Furthermore, maximum net deductibles per risk and event on XoL are contained at relatively conservative levels (largest exposure: 0.8% of capital at FYE15).

The insurer’s market position is comparatively limited. In this respect, ICEA LION Tanzania’s share of total short term industry gross premiums equated to 2% in FY15 (FY14: 3%). In response, the insurer plans to strengthen its participation in the retail and SME market in order to enhance its market profile and underwriting results (with a more consistent claims experience and a lower expense ratio expected to be realised). This differs from the traditional focus on large scale risks which, given their high value nature, were largely fronted and underwritten by a number of international companies.

The insurer’s earnings stream is fairly well diversified, with four lines of business producing material volumes of gross premium income.

Upward rating movement could develop if the insurer demonstrates sustained revenue growth in targeted products and markets, coupled with improved underwriting results. This must be combined with the maintenance of strong risk adjusted credit protection metrics. The rating could be downgraded if the insurer were to exhibit a material weakening in risk adjusted capitalisation, regulatory capital and/or liquidity metrics. Furthermore, a deterioration in asset quality could result in negative rating pressure.

NATIONAL SCALE RATINGS HISTORY    

Initial rating (August 2006)

   
Claims paying ability: A(TZ)    
Outlook: Stable    
     
Last rating (October 2015)    
Claims paying ability: A(TZ)    
Outlook: Stable    

ANALYTICAL CONTACTS

Primary Analyst   Committee Chairperson
Yvonne Masiku   Susan Hawthorne
Senior Credit Analyst   Senior Credit Analyst
(011) 784-1771   (011) 784-1771
ymasiku@globalratings.net   susanh@globalratings.net
     
Secondary Analyst    
Zwivhuya Mukosi    
Junior Credit Analyst    
(011) 784-1771    
zwivhuyam@globalratings.net    
     

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Short Term Insurance Companies, updated July 2016

ICEA LION Tanzania rating reports, 2006-2015

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.

ICEA LION General Insurance Company (Tanzania) 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 ICEA LION General Insurance Company (Tanzania) Limited with no contestation of the rating.

The information received from ICEA LION General Insurance Company (Tanzania) Limited and other reliable third parties to accord the credit rating included:

  • Audited financial results of the Company as at 31 December 2015
  • Five years prior audited financial statements
  • Unaudited interim results to 30 June 2016
  • Budget accounts for 2016
  • Statutory returns for 2015
  • The current year reinsurance/retrocession cover notes
  • Other non-public statistical information

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.

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

Capacity The largest amount of insurance available from a company. In a broader sense, it can refer to the largest amount of insurance available in the marketplace.
Capital The sum of money that is invested to generate proceeds.
Capitalisation The provision of capital for a company, or the conversion of income or assets into capital.
Capital Adequacy A measure of the adequacy of an entity’s capital resources in relation to its risks.
Cash Funds that can be readily spent or used to meet current obligations.
Claim A request for payment of a loss, which may come under the terms of an insurance contract.
Coverage The scope of the protection provided under a contract of insurance.
Deductible The portion of an insured loss to be borne by the insured before he is entitled to recovery from the insurer.
Downgrade The assignment of a lower credit rating to an insurer by a credit rating agency. Opposite of upgrade.
Experience A term used to describe the relationship, usually expressed as a percent or ratio, of premiums to claims for a plan, coverage, or benefits for a stated time period.
Exposure Exposure is the amount of risk the holder of an asset or security is faced with as a consequence of holding the security or asset. For an insurer, its exposure may also relate to the risk related to policies issued.
Fair Value The fair value of a security, an asset or a company is the rational view of its worth. It may be different from cost or market value.
International Scale Rating LC International local currency (International LC) ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled. Therefore, the rating does not take into account the possibility that it will not be able to convert local currency into foreign currency or make transfers between sovereign jurisdictions.
International Solvency Margin Measures the ability to cover current year’s written premiums using shareholder’s funds.
Liabilities All financial claims, debts or potential losses incurred by an individual or an organisation.
Liquidity The speed at which assets can be converted to cash. The ability of an insurer to convert its assets into cash to pay claims if necessary. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.
Market Risk Volatility in the value of a security/asset due to movements in share prices, interest rates, currencies, commodities or wider economic factors.
National Scale Rating The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state.
Net Profit Trading/operating profits after deducting the expenses detailed in the profit and loss account such as interest, tax, depreciation, auditors’ fees and directors’ fees.
Operating Margin Measures the efficiency of profit generation from investments and underwriting.
Premium The price of insurance protection for a specified risk for a specified period of time.
Rating Horizon The rating outlook period
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.
Risk The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.
Short Term Current; ordinarily less than one year.
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.
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.
Underwriting Result The profit or loss that an insurer derives from providing insurance or reinsurance coverage, exclusive of investment income and other income.

For a detailed glossary of terms please click here

GCR affirms ICEA LION General Insurance Company (Tanzania) Limited’s rating of A(TZ); Outlook Stable.

image_pdfPDF View

Leave a Reply



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.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2021 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.