Johannesburg, 23 Oct 2013 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Phoenix of Tanzania Assurance Company Limited of AA-(TZ); with the outlook accorded as Stable. The rating(s) are valid until 9/2014.
Global Credit Ratings has accorded the above credit rating(s) on Phoenix of Tanzania Assurance Company Limited based on the following key criteria:
Phoenix of Tanzania Assurance Company Limited (“Phoenix”) commenced operations in 1999. The insurer is 51% owned by Phoenix of East Africa (in turn an 80% owned subsidiary of Phoenix Investments Limited), a Kenyan insurer that has been operating in the region since 1912. The remaining 49% is held by Tanzanian and foreign individuals.
The rating recognises Phoenix’s established position as a top tier player in the domestic non-life insurance arena. Considerable support in this regard is derived from the insurer’s well diversified distribution strategy, which allows for greater business differentiation compared to industry peers. Underpinned by strong capital accumulation, the insurer’s international solvency margin has trended persistently above 180% over the review period (F12: 242%), albeit notably underpinned by sizeable property revaluations. Further, statutory solvency coverage remains strong, measuring at 3.1x at FYE12. Going forward, sustained strong solvency metrics are forecast. Moreover, the balanced investment portfolio is supportive of sound liquidity metrics. Nonetheless, some concern is expressed with regards to the prominence of investment property (77% of FYE12 capital), which implies heightened investment and capital risk. Over the medium term, this could be further exacerbated, pending future prospective property investments. Further, investment counterparty risk stems from a relatively high institutional cash concentration (single largest exposure:
30% in F12). Whilst increased operational risk derives from the high net concentration of the risk base to motor (64% of NWP in F12), note is taken of the sustained strong profits generated by this line of business. Positively, the insurer has demonstrated a track record of underwriting profitability, facilitated by a prudent growth strategy and strong underwriting disciplines.
In view of the fact that Phoenix’s national scale rating currently matches GCR’s rating ceiling applicable for the Tanzanian market, an upgrade of the rating is considered unlikely in the absence of a review of key industry risk factors. Downward rating pressure could emanate from a sustained weakening of the insurer’s underwriting performance, thus hindering capital accumulation, and/or the adoption of an overly aggressive risk appetite, culminating in a notable softening of key liquidity metrics.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Nov/2005)|
|Claims paying ability: AA-(TZ)|
|Last rating (Aug/2012)|
|Claims paying ability: AA-(TZ)|
|Primary Analyst||Secondary Analyst|
|Benjamin Schmidt||Damien Dube|
|+27 11 784 1771||+27 11 784 1771|
|Sector Head: Insurance|
|+27 11 784 1771|
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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.
Phoenix of Tanzania 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 Phoenix of Tanzania Assurance Company Limited with no contestation of the rating.
The information received from Phoenix of Tanzania Assurance Company Limited and other reliable third parties to accord the credit rating included the 2012 audited annual financial statements (plus four years of comparative numbers), full year detailed budgeted financial statements for 2013, unaudited year to date management accounts to June 2013, the 2013 reinsurance cover notes, debtors provisioning policy document, risk framework, reserving methodologies, capital management policy.
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.