Announcements

GCR affirms ICEA LION Life Assurance’s rating of AA-(KE); Outlook Stable.

Johannesburg, 4 September 2015—Global Credit Ratings has today affirmed the national scale financial strength rating assigned to ICEA LION Life Assurance Company Limited of AA-(KE); with the outlook accorded as Stable. The rating is valid until September 2016.

SUMMARY RATING RATIONALE

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

ICEA LION Life’s capital adequacy is considered strong, underpinned by sound growth in the capital base, coupled with containment of underwriting risk exposure. The assurer’s capital management strategy is linked to statutory solvency targets, targeting statutory CAR coverage of 2x.

The insurer’s investment portfolio continues to be conservatively managed, with a sound liquidity profile maintained relative to the business mix. Liquidity is forecast to be maintained at strong levels going forward. Further, ICEA LION Life demonstrates strong asset liability matching, which is expected to be maintained over the medium term.

Profitability has measured at a strong aggregate level over the past three years, with the average operating margin registering in excess of peers. Going forward, continuity in the insurer’s core product offering is expected to sustain relative margin strength, with potential volatility likely to prevail.

ICEA LION Life’s competitive profile is considered strong, underpinned by its solid foothold in the individual life market. This is complemented by its leading presence in the pension segment. Nonetheless, the company’s ability to maintain and grow its market position amidst increasing competitive dynamics, while sustaining price discipline represents a key challenge going forward.

The insurer’s earnings spread, while evidencing limited diversification, benefits from the high weighting towards low risk product offerings.

The quality of the insurer’s reinsurance counterparties is considered sound, with most of the entities reflecting domestic claims paying ability ratings in the “A” band or above.

ICEA LION Life’s rating currently matches GCR’s financial strength rating ceiling applicable for the Kenyan life assurance industry. In view of this, an upgrade of the rating is unlikely over the short term. Downward pressure on the rating could develop from a protracted weakening in capital adequacy and/or a deterioration in liquidity.

NATIONAL SCALE RATINGS HISTORY    
     
Initial rating (October 2000)    
Financial strength: AA(KE)    
Outlook: Stable    
     
Last rating (September 2014)    
Financial strength: AA-(KE)    
Outlook: Stable    
     

ANALYTICAL CONTACTS

Primary Analyst    
Sheri Few    
Senior Analyst    
(011) 784-1771    
few@globalratings.net    
     
Committee Chairperson    
Marc Chadwick    
Sector Head: Insurance Ratings    
(011) 784-1771    
chadwick@globalratings.net    

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Long Term Insurance companies, updated July 2015

ICEA LION Life rating reports (2012-2014)

Insurance Company of East Africa Limited (“ICEA”) RATING REPORTS (2000-2011)

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 Life Assurance 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 Life Assurance Company Limited with no contestation of the rating.

The information received from ICEA LION Life Assurance Company Limited and other reliable third parties to accord the credit rating(s) included;

  • Audited financial results as at 31 December 2014
  • 4 years of comparative numbers
  • Unaudited year to date results to 30 June 2015
  • Budgeted financial statements for 2015
  • Financial Condition Report 2014
  • The current year reinsurance cover notes
  • Actuarial valuation 2014
  • Other non-public statistical information

The rating above was 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>

Actuarial Having to do with insurance mathematics.
Assets The items on the balance sheet of the insurer which show the book value of property owned.
Assurance Terminology used to describe life insurance.
Balance Sheet An accounting term which refers to a listing of the assets, liabilities, and surplus of a company or individual as of a specific date.
Bond A certificate issued by a government or corporation as evidence of a debt.
Capacity The largest amount of insurance or reinsurance available from a company.
Claim A request for payment of a loss, which may come under the terms of an insurance contract.
Commission A certain percentage of premiums produced that is received or paid out as compensation by an insurer to agents and brokers.
Coverage The scope of the protection provided under a contract of insurance.
Insurance A formal social device for reducing risk by transferring the risks of several individual entities to an insurer.
Insured A person or organisation covered by an insurance policy, including the “named insured” and any other parties for whom protection is provided under the policy terms.
Insurer The party to the insurance contract whom promises to pay losses or benefits.
Interest Money paid for the use of money.
Liquidity The ability of an insurer to convert its assets into cash to pay claims if necessary.
Loss The happening of the event for which insurance pays.
Long term (“LT”) Not current; ordinarily more than one year.
Policy The legal document issued by the company to the policyholder, which outlines the conditions and terms of the insurance also called the policy contract or the contract.
Policyholder The person in actual possession of an insurance policy.
Portfolio All of the insurer’s in-force policies and outstanding losses, with respect to described segments of its business. Also, the total securities owned by an insurer.
Provision A part (clause, sentence, paragraph, etc.) of an insurance contract that describes or explains a feature, benefit, condition, requirement, etc. of the insurance protection afforded by the contract.
Rate The pricing factor upon which the insurance buyer’s premium is based.
Rating The statistical process by which insurers determine risks and pricing for the basic classes of insurance.
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.
Retention The net amount of risk the ceding company keeps for its own account
Risk Uncertainty as to the outcome of an event when two or more possibilities exist.
Securities Evidences of a debt or of ownership, such as stocks, bonds, and checks.
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.
Surplus The excess of assets over liabilities.
Valuation Estimation of the value of an item, usually by appraisal.

For a detailed glossary of terms please click here

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