Johannesburg, 11 Sep 2013 — Global Credit Ratings has today affirmed the national scale financial strength rating assigned to ICEA LION Life Assurance 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 Life Assurance 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 (“ICEA LION Life”) has evolved as a dedicated life assurer, while ICEA LION General Insurance Company focuses purely on non-life insurance business. Both insurers are subsidiaries of First Chartered Securities (a well-established, privately owned investment company).
The rating took cognisance of ICEA LION Life’s favourable position as a dominant participant in the Kenyan pension fund industry. Furthermore, the company exhibits a competitively sized life portfolio, which is expected to benefit in terms of enhanced operational focus following the sale of the general business. Statutory solvency is deemed sound, with the company achieving coverage of 4.4x the minimum regulatory requirement (F11: 3x). A level of above 3x is deemed sustainable by management over the medium term. ICEA LION Life adopts a conservative investment stance, characterised by a high weighting of low risk government securities. These can easily be liquidated, which provides comfort regarding its ability to honour short to medium term liabilities, and which facilitates fairly predictable investment returns. A reasonably sized property and listed equity portfolio serves to enhance investment income generating capabilities and diversification. Cognisance was also taken of the assurer’s vast distribution capabilities, which includes a large number of tied agents, contracted brokers and bancassurance ties. This is supported by the assurer’s strong brand and technical capacity. The largely individual based life book also ensures premium sources are well diversified, while no undue concentration is evident with respect to investment clients.
Upward rating movement could follow sustained, profitable penetration into the life assurance market, elevating ICEA LION Life’s standing to one of the dominant underwriters of life business in Kenya, complementing its strong standing in the pension fund industry. Downward pressure on the rating could develop from a protracted weakening in statutory coverage of actuarial liabilities below management’s stated internal minimum target of 3x. An unexpected and pronounced loss of market share, and/or sustained weakening in operating performance would also be negatively viewed.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Oct/2000)|
|Financial Strength: AA(KE)|
|Last rating (Aug/2012)|
|Financial Strength: 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 Life Assurance 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 Life Assurance Company Ltd with no contestation of the rating.
The information received from ICEA LION Life Assurance 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, actuarial valuation statement, debtors provisioning policy document, ERM processes/framework (including catastrophe management framework), reserving methodologies, capital management policy.