Announcements

GCR affirms Phoenix of Tanzania Assurance Company Limited’s rating of AA-(TZ); Outlook Stable.

Johannesburg, 29 September 2016 — 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 rating outlook accorded as Stable. The rating is valid until September 2017.

SUMMARY RATING RATIONALE

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

Phoenix Tanzania continues to reflect very strong capitalisation, with the international solvency margin registering at a very high 308% at FYE15 (FYE14: 273%). The large capital base, coupled with well contained underwriting risk, support risk adjusted capitalisation at very strong levels. Capitalisation is expected to remain a key rating strength over the medium term supported by sound earnings potential.

Liquidity remains very strong, with cash coverage of average monthly claims and net technical provisions amounting to a very high 89 months and 2.9x respectively at FYE15 (FYE14: 46 months and 2.3x respectively). Liquidity is supported by the insurer’s sizeable cash portfolio (at 2.5x NEP) and consistent investment strategy, with the insurer maintaining a fairly balanced asset mix throughout the review period. Liquidity strength is expected to persist over the rating horizon on the back of continued adherence to the existing investment strategy.

Phoenix Tanzania’s earnings capacity is viewed to be moderately strong. In this regard, favourable net commission recoveries have contributed to consecutive underwriting profits over the review period, with the insurer’s average underwriting margin amounting to 6%. In FY15, there was a notable rise in the operating expense ratio (FY15: 70% vs. FY14: 46%) which was attributed to 1) higher staff costs; 2) a TZS1bn bad debt write off; 3) once off property related expenditure (TZS0.6bn); and 4) group management fees (TZS0.6bn). This notwithstanding, the underwriting margin amounted to 4% in FY15, as an improved claims ratio (FY15: 34% vs. FY14: 59%) served to partially offset the impact of the higher cost base. Going forward, strong growth projections (FY16: 22%), coupled with expected improvement in the operating expense ratio (FY16: 38%), may lead to more robust levels of underwriting profitability.

Phoenix Tanzania’s competitive position is viewed to be intermediate, with gross written premiums fairly aligned with the estimated market average in FY15. Support in terms of market entrenchment is derived from a broad branch network and long standing corporate relationships, underpinning a relatively balanced premium distribution mix.

Phoenix Tanzania’s treaty reinsurance programme is predominantly placed with highly rated entities, whilst net deductibles on XoL per risk and event remain well contained relative to capital (at 3% at FYE15).

The rating currently matches the national scale ceiling applicable to entities operating in Tanzania. As a result, upward movement of the rating may follow an assessment of country and industry risk factors. Downward rating pressure may result from a sustained weakening of the insurer’s underwriting performance, and/or a sustained and material reduction in capitalisation and liquidity levels.

NATIONAL SCALE RATINGS HISTORY
 
Initial rating (November 2005)
Claims paying ability: AA-(TZ)
Outlook: Stable
 
Last rating (September 2015)
Claims paying ability: AA-(TZ)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Vinay Nagar
Credit Analyst
(011) 784-1771
vinay@globalratings.net
 
Committee Chairperson
Yvonne Masiku
Senior Credit Analyst
(011) 784-1771
ymasiku@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Short Term Insurance Companies, updated July 2016

Phoenix Tanzania rating reports, 2005-2015

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; and 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 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:

  • Audited financial results to 31 December 2015
  • Four years of comparative numbers
  • Unaudited interim results to 31 July 2016
  • Budgeted financial statements for 2016
  • Other related documents

The rating above was solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the rating.


GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S INSURANCE GLOSSARY

Bad Debt Amounts in arrears, i.e. overdue, and often classified as defaulted or written-off.
Benefits Financial reimbursement and other services provided to insureds by insurers under the terms of an insurance contract.
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.
Claim A request for payment of a loss, which may come under the terms of an insurance contract.
Coverage The scope of the protection provided under a contract of insurance.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Downgrade The assignment of a lower credit rating to an insurer by a credit rating agency. Opposite of upgrade.
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.
International Scale Rating LC International local currency (International LC) ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled. Therefore, the rating does not take into account the possibility that it will not be able to convert local currency into foreign currency or make transfers between sovereign jurisdictions.
International Solvency Margin Measures the ability to cover current year’s written premiums using shareholder’s funds.
Investment Portfolio A collection of investments held by an individual investor or financial institution.
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.
Loss The happening of the event for which insurance pays.
Market Risk Volatility in the value of a security/asset due to movements in share prices, interest rates, currencies, commodities or wider economic factors.
Net Retention The amount of insurance that a ceding company keeps for its own account and does not reinsure.
Portfolio All of the insurer’s in-force policies and outstanding losses, with respect to described segments of its business.
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.
Retained Earnings Earnings not paid out as dividends by a company. Retained earnings are typically reinvested back into the business and are an important component of shareholders’ equity.
Retention The net amount of risk the ceding company keeps for its own account.
Risk The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.
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.
Underwriting The process of selecting risks and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.

For a detailed glossary of terms, please click here

GCR affirms Phoenix of Tanzania Assurance Company Limited’s rating of AA-(TZ); Outlook Stable.

Leave a Reply



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 © 2022 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.