Johannesburg, 1 December 2014 — 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 rating outlook accorded as “Stable”. The rating(s) are valid until 09/2015.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to The Jubilee Insurance Company of Tanzania Limited (“Jubilee Tanzania”) based on the following key criteria:
The rating accorded is reflective of Jubilee Tanzania’s strong market position, with the insurer’s gross premium revenue for F13 covering the average market premium by a robust 3.9x, firmly cementing its position as the market leader in the domestic non-life insurance arena. This is underpinned by a relatively well diversified distribution mix and well entrenched broker relationships. Further, capitalisation is considered adequate in the context of the insurer’s overall business profile, with a sound degree of capital accumulation displayed over the review period. Nonetheless, in the absence of cohesive capital management efforts, the international solvency margin continues to display a relatively volatile trajectory and thus somewhat lags the peer average (F13: 67%; F14 budget: 53%), with renewed solvency pressure stemming from the need to capitalise life operations on the back of the impending business de-consolidation at year-end F14.
The size of the investment portfolio and conservative investment stance applied are supportive of an adequate degree of liquidity and healthy investment earnings. Over the medium term, no major change in the investment strategy is envisaged, however, some drag on liquidity may develop on the back of the near-term settlement of inter-segmental balances. Underwriting profitability has been sustained throughout the review period, with the F13 underwriting margin tracking slightly ahead of the peer average (at 5.7%). However, profitability remains underpinned by commission inflows amidst a notably elevated earned loss ratio.
Material reinsurance counterparties evidence a moderately strong aggregate level of counterparty strength. However, net deductibles per risk on XoL are somewhat elevated relative to capital when compared to prevailing regional norms. Profit risk is somewhat raised, given that the net premium mix remains dominated by motor and medical, with both lines continuing to display raised loss ratios throughout the review period. Client and intermediary concentration, however, remains well diversified.
An upward rating adjustment could develop on the back of the insurer sustainably managing its solvency position upwards to approximate industry norms, thereby supporting a greater level of solvency predictability against a fairly volatile historic trajectory. Further, profit margins are expected to be sustained at current levels (thus underpinning future earnings capacity), whilst key liquidity metrics are anticipated to be maintained in line with prevailing peer averages. Conversely, negative rating movement could emanate from a weakening in key solvency metrics notably below projected levels, a sustained degree of margin erosion (accompanied by a significant weakening in competitive strength) and/or a material change in investment strategy (giving rising to heightened liquidity pressure).
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NATIONAL SCALE RATINGS HISTORY
Initial rating (May/2007)
Claims paying ability: A+(TZ)
Last rating (September/2013)
Claims paying ability: A+(TZ)
Sector Head: Insurance
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Short Term Insurance and Reinsurance Companies, updated July 2014.
The Jubilee Insurance Company of Tanzania Limited rating reports 2007- 2013.
The Jubilee Insurance Company of Kenya Limited (“Jubilee Kenya”) rating reports 2007- 2014.
RATING LIMITATIONS AND DISCLAIMERS
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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.
The Jubilee Insurance Company of Tanzania 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 The Jubilee Insurance Company of Tanzania Limited with no contestation of the rating.
The information received from The Jubilee Insurance Company of Tanzania Limited and other reliable third parties to accord the credit rating(s) included 2013 audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year 2014 detailed budgeted financial statements, most recent year to date management accounts to 31 July 2014, 2014 reinsurance cover notes, actuarial valuation statement as at FYE13, as well as other non-public statistical information.
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 Tanzania Limited’s rating of A+(TZ); Outlook Stable.