Announcements

GCR affirms The Jubilee Insurance Company of Tanzania Limited’s rating of A(TZ); Outlook Stable.

Johannesburg, 19 October 2018– Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to The Jubilee Insurance Company of Tanzania Limited of A(TZ), with the outlook accorded as Stable. The rating is valid until September 2019.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating to The Jubilee Insurance Company of Tanzania Limited (“Jubilee Tanzania”) based on the following key factors:

Jubilee Tanzania reflects a strong competitive position, representing a core component of the insurer’s rating. Despite a shift in competitive dynamics, Jubilee Tanzania continues to be the market leader in the local short term insurance industry, with an estimated market share of around 15%. The former refers to a new directive that was passed in 2017 stating that all government linked insurance contracts should be placed with the National Insurance Corporation of Tanzania, with the private sector having to compete for a shrinking pool of risks. In GCR’s view, Jubilee Tanzania is likely to continue to defend its top tier position, despite potential growth strain, supported by strong brand recognition and entrenched relationships.

Key liquidity measures, including government securities, are viewed to be sound, as evidenced by a claims cash cover ratio of 15 months at FY17 (FY16: 11 months) and coverage of net technical liabilities of 1.2x (FY16: 0.9x). GCR expects liquidity metrics to remain within a strong range over the rating horizon, supported by improved cash flow generation potential.

Risk adjusted capitalisation improved to a moderately strong level from moderately weak levels previously, underpinned by a reduction in aged premium debtors, following the execution of the cash and carry policy in 2017 (which prohibits insurers from providing policy cover without premium collection). Accordingly, the adjusted international solvency margin equated to a higher 53% at FY17 (FY16: 32%; review period average: 41%). In GCR’s view, risk adjusted capitalisation may remain at a moderately strong level over the rating horizon, supported by healthy internal capital generation and well contained insurance risk growth. The maximum net deductible per risk and event has been maintained at a very conservative level, while reinsurance arrangements are placed with fairly well rated counterparties.

Earnings capacity, which registered at strong levels historically, moderated downwards in FY17 due to an unfavourable claims experience (particularly in the accident portfolio). In this regard, the underwriting margin declined to 0.3% in FY17 (FY16: 9%), compared to a review period average of 6%. Accordingly, net earnings were supported by investment income, with the investment yield equating to 8% in FY17 (FY16: 7%). Management expects underwriting performance to rebound to strong levels, following corrective actions implemented. As such, the ability of the insurer to achieve the targeted turnaround in underwriting profitability will be considered over the rating horizon.

The business mix is viewed to be intermediate, with three lines of business contributing in excess of 10% to gross written premiums. The risk base is geared toward motor and medical business accounting for a combined 76% of net premiums (FY16: 78%). Nevertheless, somewhat high earnings concentration is partially mitigated by the low product risk.

A rating upgrade may be considered, if risk adjusted capitalisation is sustained at improved levels, whilst earnings capacity registers within healthy levels. This would need to be supported by liquidity remaining at strong levels. Conversely, continued deterioration in earnings capacity may negatively affect the insurer’s credit profile, if this results in a weakening in liquidity and/or capitalisation.

NATIONAL SCALE RATINGS HISTORY

Initial rating (May 2007)

Claims paying ability: A+(TZ)

Outlook: Stable

Last rating (October 2017)

Claims paying ability: A(TZ)

Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst

  Secondary Analyst
Yvonne Mujuru   Linda Matavire
Sector Head: Insurance Ratings   Junior Credit Analyst
(011) 784-1771   (011) 784-1771
ymujuru@globalratings.net   lindam@globalratings.net
     
Committee Chairperson    
Susan Hawthorne    
Senior Credit Analyst    
(011) 784-1771    
susanh@globalratings.net    

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Short Term Insurance Companies, updated May 2018

The Jubilee Insurance Company of Tanzania Limited rating reports, 2007-2017

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; and c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The Jubilee Insurance Company of Tanzania Limited participated in the rating process via 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 The Jubilee Insurance Company of Tanzania Limited.

The information received from The Jubilee Insurance Company of Tanzania Limited and other reliable third parties to accord the credit rating includes:

  • Audited financial results to 31 December 2017
  • Unaudited interim results to September 2018
  • Four years of comparative audited numbers
  • Budgeted financial statements for 2018
  • The current year reinsurance cover notes
  • Other non-public statistical information

The rating above was solicited by, or on behalf of, the rated entity, 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

Accident An unplanned event, unexpected and undesigned, which occurs suddenly and at a definite place.
Accounting A process of recording, summarising, and allocating all items of income and expense of the company and analysing, verifying and reporting the results.
Capacity The largest amount of insurance available from a company. In a broader sense, it can refer to the largest amount of insurance available in the marketplace.
Capital The sum of money that is invested to generate proceeds.
Capitalisation The provision of capital for a company, or the conversion of income or assets into capital.
Cash Funds that can be readily spent or used to meet current obligations.
Cash Flow The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.
Claim A request for payment of a loss, which may come under the terms of an insurance contract.
Coverage The scope of the protection provided under a contract of insurance.
Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Deductible The portion of an insured loss to be borne by the insured before he is entitled to recovery from the insurer.
Experience A term used to describe the relationship, usually expressed as a percent or ratio, of premiums to claims for a plan, coverage, or benefits for a stated time period.
International Scale Rating LC International local currency (International LC) ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled. Therefore, the rating does not take into account the possibility that it will not be able to convert local currency into foreign currency or make transfers between sovereign jurisdictions.
International Solvency Margin Measures the ability to cover current year’s written premiums using shareholder’s funds.
Investment Income The income generated by a company’s portfolio of investments.
Liabilities All financial claims, debts or potential losses incurred by an individual or an organisation.
Liquidity The speed at which assets can be converted to cash. The ability of an insurer to convert its assets into cash to pay claims if necessary. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.
Policy The legal document issued by the company to the policyholder, which outlines the conditions and terms of the insurance.
Portfolio All of the insurer’s in-force policies and outstanding losses, with respect to described segments of its business.
Premium The price of insurance protection for a specified risk for a specified period of time.
Rating Horizon The rating outlook period
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.
Risk The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.
Securities Various instruments used in the capital market to raise funds.
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.
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.
Underwriting Margin Measures efficiency of underwriting and expense management processes.
Upgrade The assignment of a higher credit rating to an insurer by a credit rating agency. Opposite of downgrade.
Yield Percentage return on an investment or security, usually calculated at an annual rate.

For a detailed glossary of terms, please click here

GCR affirms The Jubilee Insurance Company of Tanzania Limited’s rating of A(TZ) 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.