The national scale TShs currency claims paying ability rating accorded to Phoenix of Tanzania Assurance Company Limited (“Phoenix”) has been affirmed at AA- (double A minus).
Cognisance was taken of Phoenix’s favourable strategic position as one of the leading non-life insurers operating in Tanzania. Furthermore, the insurer’s penetration of personal lines allows for a significant competitive advantage, diversifying away from the industry’s congested commercial sector, while allowing for a greater degree of pricing power. In this regard, the insurer’s strong underwriting disciplines have allowed for a consistently favourable earned loss ratio relative to the peer group mean, underpinning above-average underwriting margins.
The insurer is well capitalised, with the international solvency margin recorded at levels well above industry norms throughout the review period. This has been supported by healthy statutory solvency coverage, which measured a very high 2.7x in F10. Phoenix exhibits a sizeable investment portfolio, inclusive of substantial cash holdings, providing comfortable liquidity metrics. This notwithstanding, the portfolio displays a heavy weighting in an investment property, which represents 39% of the asset base and 72% of shareholders interest.
Rates pressure is likely to persist in the short to medium term, as new entrants in the market compete for market share. Margin pressure is expected to be further exacerbated by the decelerated growth in the industry’s underlying markets. Industry stability is undermined by the cross-placements of facultative risks with unrated or lower-rated counterparties. This practice is conducted by the majority of local players, owing to regulatory requirements to exhaust local capacity.
Marc Chadwick https://globalratings.net/uploads/files/September_2011.pdf
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