Johannesburg, 30 May 2014—Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Saham Assurance Company Kenya Limited of A-(KE); with the outlook accorded as Stable. The rating(s) are valid until 05/2015.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to Saham Assurance Company Kenya Limited (“Saham Assurance”) based on the following key criteria:
Following a transaction towards the end of 2012, the company became a 67% owned subsidiary of Colina Holdings (with the Saham Group its ultimate majority shareholder), an insurance group with a strong presence in the Francophone region, and with a strategy of expanding to other African countries. As such, in order to align the franchise of the group, the company changed its name from Mercantile Insurance Company Limited to Saham Assurance Company Kenya Limited in early 2014.
Cognisance was taken of Saham Assurance’s sound capital adequacy, with adjusted international solvency equating to a robust 139% in F13 (F12: 190%). GCR expects the strong solvency position of the company to remain largely intact, despite the planned diversification of the business mix into more traditional lines. In addition, balance sheet risk is deemed low, with the bulk of invested assets placed in liquid assets, underpinning robust liquidity measures. The insurer maintains a leading specialty focus market position in credit indemnity insurance, built by its reputable franchise in this area and strong customer loyalty. This notwithstanding, the company remains a small niche player in the overall market with a concentrated product line (sourced through a single client), which serves as a rating constraint. Note was also taken of the sharp deterioration in underwriting performance on the insurer’s key business line (credit indemnity insurance) for F13 (and the high risk appetite and exposure on some of these accounts). Whilst the company has recently enhanced its efforts to expand the business portfolio, the extent to which these ancillary lines will add to overall profitability still needs to be tested. As such, the company’s ability to stabilise and strengthen underwriting profitability will be a key rating driver over the medium term.
In view of the company’s scale and concentrated operating profile, a rating upgrade is deemed unlikely over the short term. A downward movement of the rating could result from the loss of the insurer’s key business account and/or sustained deterioration in underwriting performance. Further, a protracted decline in capital adequacy that is incommensurate for the risk profile and/or fall in liquidity metrics could also warrant rating pressure.
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NATIONAL SCALE RATINGS HISTORY
Initial rating (Jun/2005)
Claims paying ability: A-(KE)
Last rating (May/2013)
Claims paying ability: A-(KE)
Sector Head: Insurance
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Insurance Companies (July 2013)
Criteria for Rating Life Assurance Companies (July 2013)
Saham Assurance Company Kenya Limited’s (Saham Assurance; previously Mercantile Insurance Company Limited) rating reports, 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.
Saham Assurance Company Kenya 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 Saham Assurance Company Kenya Limited with no contestation of the rating.
The information received from Saham Assurance Company Kenya Limited and other reliable third parties to accord the credit rating(s) included the 2013 audited annual financial statements (plus four years of comparative numbers), full year budgeted financial statements for 2014, year to date management accounts to March 2014, 2014 reinsurance cover notes, 2013 actuarial valuation statement, 2013 Financial Condition Report and 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.