Announcements Insurance Rating Alerts

GCR affirms Phoenix of Tanzania Assurance Company Limited’s national scale financial strength rating of AA-(TZ); Outlook Stable

Rating Action

Johannesburg, 4 December 2019 – GCR Ratings (“GCR”) has affirmed Phoenix of Tanzania Assurance Company Limited’s (“Phoenix Tanzania”) national scale financial strength (formerly claims ability) rating of AA-(TZ), with a Stable Outlook.

Rated Entity / Issue Rating class Rating scale Rating Outlook/Watch
Phoenix of Tanzania Assurance Company Limited Financial strength National AA-(TZ) Stable Outlook

GCR announced that it had released new criteria for rating insurance companies in May 2019. Consequently, the rating for Phoenix Tanzania was placed ‘Under Criteria Observation’. GCR finalised the review for Phoenix Tanzania under the released Criteria for Rating Insurance Companies, May 2019. As a result, the rating for Phoenix Tanzania has been reviewed in line with the new methodology and subsequently removed from ‘Under Criteria Observation’.

Rating Rationale

Phoenix Tanzania’s rating reflects the strong financial profile of the entity, evidencing strong liquidity and risk adjusted capitalisation, coupled with intermediate earnings, which are offset by a comparatively limited business profile.

Liquidity is viewed to be very strong, with coverage of net technical liabilities by cash and stressed financial assets equating to 4.6x and operational cash coverage registering at 48 months. Phoenix Tanzania’s liquidity is supported by conservative asset allocation and sound operational cash generation. Going forward, liquidity metrics are expected to register within a similar range given expected consistency in key drivers.

Risk adjusted capitalisation remained at strong levels over the review period, supported by robust internal capital generation, with the capital base adequately catering for the quantum of insurance and market risk exposures. Earnings capacity is viewed to be moderately strong, supported by strong investment returns and sound underwriting profitability. In this regard, the five year aggregated underwriting margin equated to 4% (FY18: 10%; FY14: -5%) with the corresponding return on revenue registering at 35% (FY18: 43%; FY17: 23%). Going forward, earnings are likely to remain within the same range, supported by the implementation of minimum rates and high premium quality.

Phoenix Tanzania evidenced a comparatively weak business profile, reflected by an intermediate market position, with the market share registering at 4.4% in FY18 (FY17: 3.9%; FY14: 5.4%). The volatility in market share was largely due to the implementation of a regulation in FY17 whereby all government related business moved to the National Insurance Corporation Tanzania. However, Phoenix Tanzania is regaining market traction, leveraging off partnerships with well franchised reinsurers and comparatively sound underwriting capacity that supports strong participation on corporate risks and industry risk pools, while increasing selling efforts on more retained retail lines. Furthermore, premium diversification is considered to be limited, with two lines of business contributing materially to gross premiums and all premiums being derived from the domestic market.

Outlook Statement

The stable outlook reflects expected stability within Phoenix Tanzania’s credit profile, while factoring in potential for earnings and competitive positon to remain at similar levels over the outlook horizon.

Rating triggers

Positive rating action may stem from a sustained strengthening in earnings and competitive profile while all other credit protection are maintained at current strengths. Conversely, downward rating pressure may arise from a material weakening in earnings.

Analytical Contacts

Primary analyst Godfrey Chingono Deputy Sector Head: Insurance Ratings
Johannesburg, ZA GodfreyC@GCRratings.com +27 11 784 1771
Secondary analyst Linda Matavire Insurance Associate
Johannesburg, ZA LindaM@GCRratings.com +27 11 784 1771
Committee chair Yvonne Mujuru Sector Head: Insurance Ratings
Johannesburg, ZA YMujuru@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Insurance Companies, May 2019
GCR Ratings Scales, Symbols & Definitions, May 2019
GCR Country Risk Scores, June 2019
GCR Insurance Sector Risk Scores, November 2019
Phoenix Tanzania rating reports, 2005-2018

Ratings History

Phoenix of Tanzania Assurance Company Limited

Rating class Review Rating scale Rating class Outlook Date
Claims paying ability Initial National AA-(TZ) Stable November 2005
Last National AA-(TZ) Stable October 2018

Risk Score Summary

Risk scores Phoenix of Tanzania Assurance Company Limited
Operating environment 7.25
Country risk score 4.00
Sector risk score 3.25
Business profile (1.00)
Competitive position (0.25)
Premium diversification (0.75)
Management and governance 0.00
Financial profile 4.00
Earnings 0.50
Capitalisation 1.50
Liquidity 2.00
Comparative profile 0.00
Group support 0.00
Government support 0.00
Peer analysis 0.00
Total score 10.25

Glossary

Accident An unplanned event, unexpected and undesigned, which occurs suddenly and at a definite place.
Assets A resource with economic value that a company owns or controls with the expectation that it will provide future benefit.
Balance Sheet Also known as a Statement of Financial Position. A statement of a company’s assets and liabilities provided for the benefit of shareholders and regulators. It gives a snapshot at a specific point in time of the assets the company holds and how they have been financed.
Budget Financial plan that serves as an estimate of future cost, revenues or both.
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.
Catastrophe An event, which causes a loss of extraordinary magnitude.
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.
Diversification Spreading risk by constructing a portfolio that contains different investments, whose returns are relatively uncorrelated. The term also refers to companies which move into markets or products that bear little relation to ones they already operate in.
Dividend The portion of a company’s after-tax earnings that is distributed to shareholders.
Equity Equity is the holding or stake that shareholders have in a company. Equity capital is raised by the issue of new shares or by retaining profit.
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.
Financial Flexibility The company’s ability to access additional sources of capital funding.
Income Statement A summary of all the expenditure and income of a company over a set period.
Interest Money paid for the use of money.
Investment Income The income generated by a company’s portfolio of investments.
Investment Portfolio A collection of investments held by an individual investor or financial institution.
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.
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.
Net Retention The amount of insurance that a ceding company keeps for its own account and does not reinsure.
Operational Risk The risk of loss resulting from inadequate or failed internal processes, people or systems or from external events. This includes legal risk, but excludes strategic risk and reputational risk.
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.

Salient Points of Accorded Ratings

GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of rated entities, security or financial instrument being rated; and c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to Phoenix of Tanzania Assurance Company Limited. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.

Phoenix of Tanzania Assurance Company Limited participated in the rating process via face-to-face management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Phoenix of Tanzania Assurance Company Limited and other reliable third parties to accord the credit rating included:

  • Audited financial statements as at 31 December 2018;
  • Four years of comparative audited financial statements to 31 December
  • Full year budgeted financial statements for 2019;
  • Unaudited interim results to 31 July 2019;
  • Reinsurance cover for 2019; and
  • Other relevant documents.
image_pdfPDF View


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.