Announcements

GCR affirms The Jubilee Insurance Company of Kenya Limited’s rating of AA-(KE); outlook Stable

Johannesburg, 29 July 2014 — Global Credit Ratings (“GCR”) has today affirmed the national scale claims paying ability rating assigned to The Jubilee Insurance Company of Kenya Limited (“Jubilee Kenya”) of AA-(KE); with the outlook accorded as Stable. The rating(s) are vaild until 06/2015.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit rating(s) on Jubilee Insurance Company of Kenya Limited based on the following key criteria:

Jubilee Kenya is a wholly owned subsidiary of Jubilee Holdings Limited, which has insurance operations in Kenya, Uganda, Tanzania, Burundi and Mauritius. The group is listed on the Nairobi, Uganda and Dar es Salaam Securities Exchanges, reflecting a market capitalisation of US$216m in June 2014 on the major Kenyan bourse. Aga Khan Fund for Economic Development is the largest shareholder of the holding company, at 38%. The balance is held by a number of smaller institutional and private investors.

The rating is underpinned by Jubilee Kenya’s standing as the market leader in the domestic insurance arena (15% market share as per 2012 non-life industry GWP), with entrenched representation in key lines of business (in particular medical) and strong brand value supporting sustained healthy premium growth in a highly competitive environment.

Strong capital accumulation (in part buoyed by favourable fair value investment gains), coupled with controlled premium growth saw the international solvency margin edge upwards for the 2nd consecutive year in F13, thus closely approximating the industry norm. In addition, the life fund registered a healthy actuarial surplus at FYE13. Going forward, key solvency metrics are forecast to be maintained at strengthening levels relative to historical norms. In addition, the size and relatively balanced asset allocation of the investment portfolio are supportive of healthy investment returns and a moderate degree of liquidity. Moreover, Jubilee Kenya maintains one of the largest deposit administration portfolios in the market, which is backed by a suitable mix of invested assets. However, some investment risk prevails amidst a heightened prominence of listed equities relative to capital (at 44% for non-life operations) and limited underlying counter diversification.

The favourable underwriting trend displayed over the review period, with margins tracking at healthy levels, and closely aligned to industry norms is also favourably viewed. This is supported by a well contained cost base and a stable (albeit comparatively elevated) loss ratio. Further, the life segment continues to contribute positively to overall earnings amidst a sustained high level of stability in key operating ratios. Whilst risk to revenue remains elevated in light of limited class diversification and a persistent high reliance on medical business (at 49% of NWP in F13), this is viewed in context of the sound underwriting trajectory exhibited by this line of business of late. Net retentions per risk and event are contained at low levels relative to capital, whilst most retrocession counterparties are generally of a sound credit quality.

Over the medium term, an upward adjustment of the rating remains subject to the attainment of sustained strong liquidity and risk adjusted solvency metrics, whilst maintaining underwriting profitability at a competitive and capital -generative level. Conversely, downward rating pressure could arise from a decline in key solvency metrics below historic averages and/or the reversion to a more risky investment stance, thus unduly compromising key liquidity metrics. Further, a marked weakening in underwriting profitability over a sustained period could give rise to a rating downgrade.

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

NATIONAL SCALE RATINGS HISTORY

Initial rating (May/2007)
Claims paying ability: AA-(KE)
Outlook: Stable

Last rating (Jun/2013)
Claims paying ability: AA-(KE)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Benjamin Schmidt
Senior Credit Analyst
+27 11 784 1771
schmidt@globalratings.net

Committee Chairperson
Marc Chadwick
Sector Head: Insurance
+27 11 784 1771
chadwick@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Insurance Companies (July 2013).
The Jubilee Insurance Company of Kenya Limited rating reports 2007- 2013.

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/RATING-SCALES-DEFINITIONS . 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.

Jubilee Insurance Company of 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 Jubilee Insurance Company of Kenya Limited with no contestation of the rating.

The information received from The Jubilee Insurance Company of Kenya Limited and other reliable third parties to accord the credit rating included the audited annual financial statements for F13 (plus four years of comparative numbers), latest internal and/or external report to management, full year F14 detailed budgeted financial statements, reinsurance cover notes for 2014, the actuarial valuation statement for 2013 and most recent year-to-date management accounts to 31 March 2014. In addition, information specific to the rated entity and/or industry was also received.

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.

GCR affirms The Jubilee Insurance Company of Kenya Limited’s rating of AA-(KE); outlook Stable

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