Johannesburg, 30 Oct 2014 — 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 09/2015.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to Phoenix of Tanzania Assurance Company Limited (“Phoenix Tanzania”) based on the following key criteria:
The insurer’s market positioning is viewed to be competitive, with its gross premium base in F13 largely matching the average market premium for the year. Support in terms of market entrenchment is derived from a broad-spanning branch network and long standing corporate relationships, underpinning a relatively balanced premium distribution mix. Further note is taken of the recently concluded majority share buy-out by a prominent international insurer at group level. This may enhance the insurer’s corporate profile going forward, albeit this remains subject to the bedding down of operational strategies.
Considerable rating uplift is derived from the very strong level of capitalisation sustained by the insurer, buoyed by a strong earnings generation and high degree of profit retention. Reflective of this, the international solvency margin continues to track at a robust level (well above the industry norm), whilst risk adjusted capitalisation is considered equally sound. Robust projected solvency levels serve to augment GCR’s view of the insurer’s relative capital strength over the short to medium term. Further, underwriting profitability has been sustained at a strong (above industry norm) level throughout the review period, underpinned by a very competitive loss experience and a reasonably aligned delivery cost base. Whilst projected strong profitability is reflective of GCR’s favourable view on operational disciplines employed, current expenditure levels encompass some headroom for future cost containment.
In addition, the insurer’s liquidity position is considered sound, with key liquidity metrics maintained at healthy levels over the review period. Some degree of investment risk prevails amidst a strong prominence of an illiquid property investment (66% of capital at FYE13), although the stable investment income streams derived from this investment are noted. The 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 0.3% in F13).
Given that Phoenix Tanzania’s national scale rating currently matches GCR’s rating ceiling applicable for the Tanzanian market, an upgrade of the rating remains unlikely over the short term in the absence of a revised view on key industry risk characteristics by GCR. Conversely, downward rating pressure may result from a sustained weakening of the insurer’s underwriting performance, thus hindering capital accumulation, and/or the adoption of an overly aggressive investment strategy, resulting in undue liquidity pressure.
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NATIONAL SCALE RATINGS HISTORY
Initial rating (Nov/2005)
Claims paying ability: AA-(TZ)
Last rating (Sep/2013)
Claims paying ability: AA-(TZ)
Sector Head: Insurance
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Criteria for Rating Short Term Insurance and Reinsurance Companies, July 2014
Phoenix of Tanzania Assurance Company Limited rating report 2005-2013
RATING LIMITATIONS AND DISCLAIMERS
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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(s) included 2013 audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year 2014 detailed budgeted financial statements, most recent year to date management accounts to 30 June 2014, 2014 reinsurance cover notes, statutory submissions for 2012 and 2013, as well as other non-public statistical information.
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.
GCR affirms Phoenix of Tanzania Assurance Company Limited’s rating of AA-(TZ); Outlook Stable.