Announcements

GCR affirms Sanlam Life Insurance (Tanzania) Ltd’s rating of AA-(TZ); Outlook Stable

Johannesburg, 15 Oct 2015 — Global Credit Ratings has today affirmed the national scale financial strength rating assigned to Sanlam Life Insurance (Tanzania) 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 Sanlam Life Insurance (Tanzania) Limited (“Sanlam Tanzania”) based on the following key criteria:

Sanlam Tanzania holds the dominant market position in the domestic life insurance arena, representing a key rating strength. The insurer’s very high market share (FY14: 53%) is underpinned by an entrenched position in the buoyant credit life market, which is facilitated by long standing business relationships with key bancassurance and corporate partners. The insurer rebranded to Sanlam Tanzania in August 2015, resulting in more explicit branding alignment with the Sanlam group. In conjunction with technical and operational support derived from the group, this is viewed to cement the insurer’s very strong business profile.

Capitalisation is viewed to be very strong, reflecting a core credit strength. Capital generation has been high over the past three years, with capital (net of declared dividends) increasing by a CAGR of 41% over the past three years, and amounting to TZS12bn at FYE14. Accordingly, in conjunction with the low risk profile of the product offering, strong risk adjusted capital adequacy has been maintained over the review period. GCR expects sound capitalisation metrics to persist going forward.

The rating is supported by high earnings capacity, with Sanlam Tanzania displaying robust operating performances over the past three years. This has been underpinned by a very low claims experience (viewed to be a function of volumes, pricing and underwriting) and a well contained operating cost ratio, with the realisation of scale benefits driving a greater degree of cost absorption of late. Embedded Value and the Value of New Business (as per an independent actuarial assessment at FYE14) have been maintained at healthy levels.

The size of the investment portfolio and relative conservatism of associated allocations are supportive of healthy liquidity and asset-liability matching. Going forward, no material change in the investment strategy is envisaged. Risk management is viewed to be enhanced by the deployment of an enterprise risk management framework developed at group level.

The rating currently matches the national scale ceiling applicable to entities operating within the Tanzanian insurance industry. As a result, upward movement of the rating may follow an assessment of country and industry risk factors. Downward rating pressure could materialise on the back of a prolonged deterioration in operating performance, coupled with a sustained weakening of capital and solvency metrics well below historic norms.

NATIONAL SCALE RATINGS HISTORY    
     
Initial rating (April 2010)    
Financial strength: A+(TZ)    
Outlook: Stable    
     
Last rating (September 2014)    
Financial strength: AA-(TZ)    
Outlook: Stable    

ANALYTICAL CONTACTS

Primary Analyst   Committee Chairperson
Marc Chadwick   Yvonne Masiku
Sector Head: Insurance Ratings   Senior Credit Analyst
(011) 784-1771   (011) 784-1771
chadwick@globalratings.net   ymasiku@globalratings.net
     
Secondary Analyst    
Rodwell Chevure    
Junior Credit Analyst    
(011) 784-1771    
rodwellc@globalratings.net    
     

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Long Term Insurance Companies, updated July 2015

Sanlam Tanzania (previously known as “African Life”) rating reports, 2009-2014

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.

GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S INSURANCE GLOSSARY

Actuarial Having to do with insurance mathematics.
Assets The items on the balance sheet of the insurer which show the book value of property owned.
Assurance Terminology used to describe life insurance.
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.
Bond A certificate issued by a government or corporation as evidence of a debt.
Capacity The largest amount of insurance or reinsurance available from a company.
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.
Coverage The scope of the protection provided under a contract of insurance.
Insurance A formal social device for reducing risk by transferring the risks of several individual entities to an insurer.
Insured A person or organisation covered by an insurance policy, including the “named insured” and any other parties for whom protection is provided under the policy terms.
Insurer The party to the insurance contract whom promises to pay losses or benefits.
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 The happening of the event for which insurance pays.
Long term (“LT”) Not current; ordinarily more than one year.
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.
Policyholder The person in actual possession of an insurance policy.
Portfolio All of the insurer’s in-force policies and outstanding losses, with respect to described segments of its business. Also, the total securities owned by an insurer.
Provision A part (clause, sentence, paragraph, etc.) of an insurance contract that describes or explains a feature, benefit, condition, requirement, etc. of the insurance protection afforded by the contract.
Rate The pricing factor upon which the insurance buyer’s premium is based.
Rating The statistical process by which insurers determine risks and pricing for the basic classes of insurance.
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.
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.
Securities Evidences of a debt or of ownership, such as stocks, bonds, and checks.
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.
Surplus The excess of assets over liabilities.
Valuation Estimation of the value of an item, usually by appraisal.

For a detailed glossary of terms please click here

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.

Sanlam Life Insurance (Tanzania) 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 Sanlam Life Insurance (Tanzania) Limited with no contestation of the rating.

The information received from Sanlam Life Insurance (Tanzania) Limited and other reliable third parties to accord the credit rating(s) included;

  • Audited financial results of Company as at 31 December 2014
  • Four years prior audited financial statements
  • Unaudited interim results as per 30 June 2015
  • Budgeted financial statements for 2015
  • Actuarial Report 2014
  • The current year reinsurance/retrocession cover notes
  • 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.

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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