Johannesburg, 6 October 2015 — 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 is valid until September 2016.
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:
Capitalisation has been measured at very strong levels throughout the review period, and represents a key rating strength for Phoenix Tanzania. A consistent track record of solid capital generation, coupled with a low quantum of underwriting risk, has strengthened the insurer’s risk adjusted capital position. The international solvency margin has continuously tracked above the peer average, with the review period average solvency margin registering at a high 245%. Capitalisation is expected to remain very strong over the medium term.
Phoenix Tanzania’s liquidity position has consistently measured at very strong levels throughout the review period, while also exhibiting an upward trajectory. Cash coverage of net technical liabilities averaged 2x over the review period (FY14: 2.3x). Liquidity is expected to remain sound over the rating horizon, given that the investment strategy is not expected to deviate materially from the current policy.
Earnings capacity is viewed to be strong, with operational profitability buoyed by a high net commission recovery ratio. Earnings are expected to remain strong over the medium term, with potential operational and technical benefits to be derived from the group’s new holding company, Mauritius Union Assurance (“Mauritius Union”).
Phoenix Tanzania’s competitive position is intermediate, with gross written premiums aligned with the market average in FY14. 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’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 0.3% in FY14).
The rating currently matches the national scale ceiling applicable to entities operating in Tanzania. As a result, upward movement of the rating may follow a reassessment 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)|
|Last rating (September 2014)|
|Claims paying ability: AA-(TZ)|
|Primary Analyst||Secondary Analyst|
|Marc Chadwick||Vinay Nagar|
|Sector Head: Insurance Ratings||Junior Credit Analyst|
|(011) 784-1771||(011) 784-1771|
|Senior Credit Analyst|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Short Term Insurance Companies, updated July 2015
Phoenix Tanzania rating reports (2005-2014)
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; 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:
- The audited financial statements to December 2014
- Four years of comparative numbers
- Unaudited year to date results to 30 June 2015
- Budgeted financial statements for 2015
- The current year reinsurance/retrocession cover notes
- Other related documents
The rating above were 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
|Assets||The items on the balance sheet of the insurer which show the book value of property owned. Under regulations, not all property or other resources may be admitted in the statement of the insurer. This gives rise to the term ‘non-admitted assets’.|
|Balance Sheet||An accounting term which refers to a listing of the assets, liabilities, and surplus of a company or individual as of a specific date.|
|Capacity||The largest amount of insurance or reinsurance available from a company. In a broader sense, it can refer to the largest amount of insurance or reinsurance available in the marketplace.|
|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 to agents and brokers.|
|Insurer||The party to the insurance contract whom promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.|
|Interest||Money paid for the use of money.|
|Liquidity||The ability of an insurer to convert its assets into cash to pay claims if necessary.|
|Loss Ratio||The ratio of claims to premiums. It may be calculated in several different ways, using paid premiums or earned premiums, and using paid claims with or without changes in claim reserves and with or without changes in active life reserves.|
|Policy||The legal document issued by the company to the policyholder, which outlines the conditions and terms of the insurance also called the policy contract or the contract.|
|Premium||The price of insurance protection for a specified risk for a specified period of time.|
|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.|
|Reserve||An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders.|
|Retention||The net amount of risk the ceding company keeps for its own account.|
|Risk||Uncertainty as to the outcome of an event when two or more possibilities exist.|
|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.|
|Statutory||Required by or having to do with law or statute.|
|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 more detailed glossary of terms/acronyms used as per GCR insurance glossary, please click here