Global Credit Ratings has accorded the above credit rating(s) on Pan Africa Life Assurance Limited based on the following key criteria:
Pan Africa Life Assurance Limited (“Pan Africa”) was founded in 1946 and is the primary operating subsidiary of Pan Africa Insurance Holdings Limited (“PAIHL”). The company is the largest life assurer in Kenya by GWP, with a strong presence in both group and individual life. In 2001, African Life acquired a 50% stake in PAIHL, which in turn was acquired by the Sanlam Group. The remaining 50% is listed on the Nairobi Stock Exchange.
Pan Africa’s favourable position as the market leader in the Kenyan life assurance industry was positively viewed. In addition, note was taken of technical support
and operational synergies derived through its association with the Sanlam Group. Following a detailed examination of the underlying business risks, previously targeted 2x CAR cover was lowered to 1.75x, which level was met in both F11 and F12. Furthermore, from a statutory perspective, the assurer reported coverage of 1.6x in F12 (F11: 1.1x), above the required minimum of 1x. Pan Africa adopts a conservative investment stance, characterised by a high weighting of low risk government securities, commercial paper and cash deposits. Reinsurance protection limits the highest net retention to KShs3m for CAT (KShs0.2m per risk), which translates to 1.4% of FYE12 capital. Pan Africa has demonstrated an ability to generate robust operating surpluses throughout the review period (attaining record highs in F12), supported by a relatively well contained cost structure and sound realised investment proceeds. However, some earnings volatility persists in light of unrealised investment movements. Cognisance was also taken of the company’s vast distribution capabilities, which includes an extensive agency force, established broker and corporate relationships, and bancassurance ties. This is complemented by Pan Africa’s strong brand and innovative product offerings.
Pan Africa’s rating currently matches GCR’s financial strength rating ceiling applicable for the Kenyan life assurance industry. In light of this, a further upgrade of the rating is deemed unlikely over the short to medium term. Downward pressure on the rating could develop from a sustained weakening of the operating result,
and/or a protracted decline in CAR coverage. With regards to the latter, coverage is expected to closely track targeted levels (of 1.75x) over a sustained period in
order to maintain the current rating.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Nov/2009)|
|Financial Strength: A+(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
Pan Africa Life Assurance 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 Pan Africa Life Assurance Limited with no contestation of the rating.
The information received from Pan Africa Life Assurance Limited and other reliable third parties to accord the credit rating included the latest audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most
recent year to date management accounts, 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. In addition, information specific to the
rated entity and/or industry was also received.