Johannesburg, 3 November 2015 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Seguradora Internacional de Mocambique, S.A. of AA-(MZ), 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 Seguradora Internacional de Mocambique, S.A. (“SIM”) based on the following key criteria:
Consolidated earnings capacity is viewed to be robust, with SIM consistently reporting underwriting profitability at very high levels over the review period. This has been facilitated by a well contained loss ratio in the short term business, coupled with excellent operational cost efficiencies. The insurer is expected to continue to report robust levels of underwriting profitability over the medium term.
The rating encompasses SIM’s strong levels of capitalisation, with the international solvency margin in FY14 (135%) tracking comfortably above the consolidated industry average (108%). Risk adjusted capitalisation lends further support to capital strength, with asset and operational risk viewed to be well contained. Capital strength is expected to be maintained at current levels over the rating horizon, buoyed by strong profit generation.
SIM continues to maintain a strong competitive position in both the life and short term insurance markets, representing a key input to the insurer’s rating. The entrenched competitive profile is supported by strong group relationships and brand strength. Furthermore, treaty and facultative reinsurance is primarily placed with secure rated counterparties, while risk and event net retention levels are considered to be prudent.
Liquidity has been measured at strong levels, representative of the insurer’s healthy operating cash flows throughout the review period. Accordingly, the cash to technical liabilities ratio was reported at a prudent 1x in FY14, and is expected to be maintained at similar levels over the medium term.
The rating currently matches the national scale ceiling applicable to entities operating in Mozambique. As a result, upward movement of the rating may follow an assessment of country and industry risk factors. A sustained weakening in operating profitability and/or pronounced deterioration in key credit protection metrics could result in a downward rating adjustment.
|NATIONAL SCALE RATINGS HISTORY|
|Initial / last rating (February 2015)|
|Claims paying ability: AA-(MZ)|
|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
Seguradora Internacional de Mocambique, S.A. (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.
Seguradora Internacional de Mocambique, S.A. 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 Seguradora Internacional de Mocambique, S.A. with no contestation of the rating.
The information received from Seguradora Internacional de Mocambique, S.A. 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 September 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
GCR affirms Seguradora Internacional de Mocambique, S.A.’s rating of AA-(MZ); Outlook Stable.