Johannesburg, 31 July 2015 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Phoenix of Uganda Assurance Company Limited of A(UG); with the outlook accorded as Positive. The rating is valid until June 2016.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating to Phoenix of Uganda Assurance Company Limited (“Phoenix Uganda”) based on the following key criteria:
The revised outlook reflects Phoenix Uganda’s favourable trend of underwriting profitability, operating earnings and consistent risk-adjusted capitalisation.
The company’s operating performance has been strong and stable historically. GCR considers the sharp compression in technical profitability in F14 as a short-term weakness (largely owing to a once-off debtors expense), with Phoenix Uganda’s earnings profile expected to recover to strong levels going forward.
Phoenix Uganda displays strong risk-based capital adequacy, supported by high ongoing profitability and capital retention. A stable premium and investment mix supports GCR’s favourable view of the insurer’s future capital strength. GCR notes, however, that Phoenix Uganda’s risk-based capital ratios are weakened somewhat by the exposure to outstanding premium receivables, albeit still supportive of the current rating.
Phoenix Uganda has maintained a consistently liquid balance sheet over the review period, with liquidity measures expected to remain at strong levels over the rating horizon. Partly offsetting this is the high counterparty exposure in terms of cash placements. The low-risk investment portfolio is considered a rating strength, with a conservative investment allocation maintained.
These positive rating factors are partially offset by limited earnings diversification by line of business, with two classes representing a material component of net premiums. Further, while GCR positively views the insurer’s well established local franchise, the rating is constrained by its small size in relative terms.
Future positive rating actions may result from a sustained improvement in underwriting results and an increase in risk-adjusted capitalisation, through an improvement in the outstanding debtors position. Conversely, negative rating pressure could occur if Phoenix Uganda displays a material weakening in capitalisation, and/or a severe reduction in profitability and/or liquidity.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (April 2012)|
|Claims paying ability: A(UG)|
|Last rating (July 2014)|
|Claims paying ability: A(UG)|
|Sector Head: Insurance Ratings|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Short Term Insurance and Reinsurance Companies, updated July 2014
Phoenix Uganda rating reports (2012-2014)
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 Uganda 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 Uganda Assurance Company Limited with no contestation of the rating.
The information received from Phoenix of Uganda Assurance Company Limited and other reliable third parties to accord the credit rating(s) included;
- The 2014 audited financial statements
- 4 years of comparative audited numbers
- Unaudited interim results as per 31 March 2015
- Budgeted financial statements for 2015
- 2015 reinsurance cover notes
- 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 ratings.
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 detailed glossary of terms utilised in this announcement please click here