Announcements

GCR affirms Société Nationale d’Assurances et de Réassurances’ rating of A(BF); Outlook Stabl

Johannesburg, 06 Oct 2014 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Société Nationale d’Assurances et de Réassurances of A(BF); with the outlook accorded as Stable. The rating is valid until 10/2015.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating to Société Nationale d’Assurances et de Réassurances (“SONAR-IARD”) based on the following key criteria:

The rating is supported by the insurer’s strong position as the market leader in the short-term insurance market in Burkina Faso. Going forward, GCR expects Sonar’s market position to be sustained by the well-established brand, entrenched client-facing relationships and strong franchise value.

The insurer is sufficiently capitalized, despite high dividend pay-outs resulting in subdued capital growth. Furthermore, the reduction in aged debtors, following the implementation of the new premium credit regulations, resulted in the adjusted international solvency margin improving to 68% in F13 (F12: 44%). Note is taken of the fair value movements, supporting the rating (with valuations conducted by an independent and reputable property valuator), which maintains risk adjusted capital adequacy at strong levels.

Liquidity metrics are viewed to be moderate, with cash covering net technical liabilities by 0.6x in F13 (F12: 0.7x), and claims cash coverage at 37.3 months (F12: 39 months). Note is taken of Sonar’s sizeable investment portfolio, representing 3.3x the net earned premium base, and 1.3x technical provisions. This allows for strong investment income, while also providing a source of redeemable instruments to supplement liquidity.

Asset risk is considered high, given the composition of the investment portfolio, with non-cash investments accounting for 1.7x of the insurer’s capital base at FYE13 (FYE12: 1.6x). Cognisance is also taken of the investment restrictions imposed by the Conférence Interafricaine des Marchés d’Assurances (“CIMA”) code, limiting the investment asset classes and diversification available in the region. Coupled with the conservative CIMA technical reserving requirements, this gives rise to an inherent degree of asset risk.

Sonar has registered net underwriting losses for four consecutive years. This is largely due to the insurer’s inability to translate its notable scale advantage into material efficiency gains. However, strong investment income has helped the insurer achieve net profitability over the review period.

The insurer’s exposure to loss accumulation exerts rating pressure, given the absence of CAT cover on fire risks. Furthermore, the reinsurance programme structure introduces a moderate degree of counterparty concentration and credit risk. Cognisance is, however, taken of the moderate credit quality of the underlying reinsurers in the Globus Re reinsurance programme and the fact that the company retains no risk for its own account.

Upward movement on the rating could develop with a demonstrated turnaround in underwriting profitability, reflecting an upward trend of earnings capacity. Furthermore, a material strengthening in risk adjusted solvency, an improvement in liquidity metrics, and an increased spreading of liquid assets, would be positively considered. Conversely, downward rating movement may arise if the insurer were to evidence a material deterioration in underwriting performance, a sustained reduction in the risk adjusted solvency margin, and/or a further weakening in liquidity metrics.

For a detailed glossary of terms utilised in this announcement please click here

NATIONAL SCALE RATINGS HISTORY

Initial rating (Oct/2009)
Claims paying ability: A(BF)
Outlook: Stable

Last rating (Nov/2013)
Claims paying ability: A(BF)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Yvonne Masiku
Analyst
(011) 784-1771
Ymasiku@globalratings.net

Secondary Analyst
Marc Chadwick
Sector Head: Insurance
(011) 784-1771
Chadwick@globalratings.net

Committee Chairperson
Benjamin Schmidt
Senior Credit Analyst
(011) 784-1771
Schmidt@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Insurance Companies, July 2014
Société Nationale d’Assurances et de Réassurances (SONAR-IARD) rating reports, 2009-2013

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.

Société Nationale d’Assurances et de Réassurances (SONAR-IARD) 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 Société Nationale d’Assurances et de Réassurances (SONAR-IARD) with no contestation of the rating.

The information received from Société Nationale d’Assurances et de Réassurances (SONAR-IARD) and other reliable third parties to accord the credit rating included the 2013 audited annual financial statements (plus four years of comparative numbers), latest internal report to management, full year budgeted financial statements for 2014, unaudited year to date management accounts to July 2014, the current year reinsurance cover notes, statutory reporting submissions and 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 rating.

GCR affirms Société Nationale d’Assurances et de Réassurances’ rating of A(BF); Outlook Stable.

image_pdfPDF View

Leave a Reply



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.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2021 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.