Announcements Insurance Rating Alerts

GCR affirms SONAR IARD’s national scale financial strength rating of A+(BF), on a resilient credit profile despite higher operating environment risks.

Rating action

Johannesburg, 30 September 2020 – GCR Ratings (“GCR”) has affirmed Société Nationale d’Assurances et de Réassurances’ (“SONAR IARD”) national scale financial strength rating of A+(BF), with a Stable Outlook.

Rated Entity

Rating class

Rating scale

Rating

Outlook / Watch

Société Nationale d’Assurances et de Réassurances

Financial strength

National

A+(BF)

Stable Outlook

The rating action follows a revision of the country and insurance sector risk assessments of various jurisdictions, including the Conference Interafricaine des Marchés d’Assurance (“CIMA”) Zone where the rated entity is domiciled and operates.

Country risk scores were updated in a market alert released on 27th May 2020. Click here to access the link. Meanwhile, latest updates on insurance sector risk scores were released on 15th July 2020. Click here to access link.

Combined, country and sector risk scores comprise the operating environment score, which is a key input into GCR’s ratings.

Rating rationale

Country risk scores of select jurisdictions, including Benin, Burkina Faso, Cameroon and Cote d’Ivoire, were lowered to reflect expectations of the adverse impact of COVID-19 related disruptions on economic productivity, as well as our view of the effectiveness of interventions made to stabilise the economy. Meanwhile, the insurance sector risk score revisions capture the potential slow-down in industries’ growth and earnings pressures amidst exacerbated economic challenges, albeit insurance markets of the CIMA zone are likely to be resilient considering relatively low impact of the pandemic on revenue and claims.

While the subsequent lowering of the operating environment scores has not translated to a rating downgrade, note was taken of persisting claims pressures moderating earnings. As such, the ability of the insurer to maintain earnings at rating sufficient levels will represent a key consideration over the medium term. GCR will continue to monitor the rating, with a full review on SONAR IARD expected to be carried out by December 2020.

Outlook statement

The Stable Outlook captures the expectation that the financial profile is likely to moderate within rating sufficient levels, driven by earnings pressures negatively impacting risk adjusted capitalisation and liquidity.

Rating triggers

A rating upgrade is unlikely over the medium term, however, a sustainable turnaround in underwriting profitability could be positively viewed. Conversely, sustained weakness in earnings will trigger negative rating action, especially if this results in a reduction in risk adjusted capitalisation and/or a weakening in liquidity below expected levels.

Analytical contacts

Primary analyst

Fleur Ngassa

Analyst: Insurance Ratings

Johannesburg, ZA

MarlaineN@GCRratings.com

+27 11 784 1771

     

Committee chair

Matthew Pirnie

Group Head of Ratings

Johannesburg, ZA

MatthewP@GCRratings.com

+27 11 784 1771

Related criteria and research

Criteria for the GCR Ratings Framework, May 2019

Criteria for Rating Insurance Companies, May 2019

GCR Ratings Scales, Symbols & Definitions, May 2019

GCR Country Risk Scores, May 2020

GCR Insurance Sector Risk Scores, July 2020

Ratings history

Société Nationale d’Assurances et de Reassurances

Rating class

Review

Rating scale

Rating class

Outlook/Watch

Date

Claims paying ability

Initial

National

A(BF)

Stable

October 2009

Financial strength

Last

National

A+(BF)

Stable

December 2019

Risk score summary

Rating components & factors

Risk scores

 

 

Operating environment

6.00

Country risk score

3.00

Sector risk score

3.00

   

Business profile

0.25

Competitive position

1.00

Premium diversification

(0.75)

Management and governance

0.00

 

 

Financial profile

1.50

Earnings

0.50

Capitalisation

0.75

Liquidity

0.25

   

Comparative profile

0.00

Group support

0.00

Government support

0.00

Peer analysis

0.00

   

Total score

7.75

 

Glossary

Rating Outlook

See GCR Rating Scales, Symbols and Definitions.

Release

An agreement between the creditor and debtor, in terms of which the creditor release the debtor from its obligations.

Reserve

(1) An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not yet due.

Reserves

A portion of funds allocated for an eventuality.

Risk

The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.

Short Term

Current; ordinarily less than one year.

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.

Salient Points of Accorded Ratings

GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the rating is based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such rating is an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to the rated entity. The rating was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating. The rated entity participated in the rating process via virtual management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The information received from the entity and other reliable third parties to accord the credit rating included:

  • Latest audited financial statements;
  • Four years of comparative audited financial statements to 31 December;
  • Other relevant documents
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