Announcements

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

Johannesburg, 13 November 2015 — 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 2016.

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 criteria:

Jubilee Tanzania has cemented its position as the market leader in the domestic short term insurance arena. The insurer’s gross premium market share amounted to 16% in FY14, with revenue covering the average market premium by a robust 4x. This is underpinned by the dominance of the insurer’s medical offering in the market, as well as a well-diversified distribution mix and entrenched broker relationships.

Liquidity is very strong, with cash covering technical liabilities by 1.2x at FYE14. This is a function of Jubilee Tanzania’s consistent asset allocation strategy, with 79% of the investment portfolio contained in cash and short term investments. Management has affirmed its commitment to maintaining a conservative investment strategy, which in conjunction with strengthened working capital management, is viewed to be integral to the maintenance of liquidity at sound levels.

Earnings capacity is viewed to be strong, with the insurer reporting positive underwriting margins throughout the review period. Over the past three years, Jubilee Tanzania has reported material net commission recoveries, serving to further enhance underwriting profitability.

Capitalisation is viewed to be intermediate. The nominal international solvency margin equated to 55% in FY14, having averaged 58% over the past three years. The insurer bears capital risk to aged premium debtors, which stood at TZS2.2bn as at 3Q FY15 (FY14: TZS5bn). Given this, the adjusted international solvency margin is budgeted at 42% in FY15 (FY14: 37%). Risk adjusted capitalisation is expected to remain within a moderate range over the short term, although management has prioritised collection efforts as a means of addressing balance sheet exposure to debtors.

Material reinsurance counterparties evidence a moderately strong aggregate level of counterparty strength, with net deductibles per risk and event on XoL well contained relative to capital (largest exposure: 1% at FYE14).

Upward rating action could develop on the back of a sustained strengthening in risk adjusted solvency metrics. This must be accompanied by strengthened working capital management, while maintaining key liquidity metrics and operating performance at current levels. Downward rating action may result from a weakening in risk adjusted capital, particularly due to ongoing collection challenges in the debtors’ book, and/or a marked weakening in liquidity and operating performance.

NATIONAL SCALE RATINGS HISTORY
 
Initial rating (May 2007)
Claims paying ability: A+(TZ)
Outlook: Stable
 
Last rating (September 2014)
Claims paying ability: A+(TZ)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst   Secondary Analyst
Marc Chadwick   Vinay Nagar
Sector Head: Insurance Ratings   Junior Credit Analyst
(011) 784-1771   (011) 784-1771
chadwick@globalratings.net   vinay@globalratings.net
     
Committee Chairperson    
Sheri Few    
Senior Credit Analyst    
(011) 784-1771    
few@globalratings.net    

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Short Term Insurance Companies, updated July 2015

Jubilee Tanzania rating reports (2007-2014)

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.

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 has been disclosed to and contested by The Jubilee Insurance Company of Tanzania Limited, and the outlook was amended following the provision of further material information by the entity.

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

  • The financial statements to December 2014
  • Four years of comparative numbers
  • Unaudited year to date results to 30 June 2015
  • Budgeted financial statements for 2015
  • The current year reinsurance/retrocession cover notes
  • Aged debtors book as at 30 September 2015
  • 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.


GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S INSURANCE GLOSSARY

Assets The items on the balance sheet of the insurer which show the book value of property owned. Under regulations, not all property or other resources may be admitted in the statement of the insurer. This gives rise to the term ‘non-admitted assets’.
Balance Sheet An accounting term which refers to a listing of the assets, liabilities, and surplus of a company or individual as of a specific date.
Capacity The largest amount of insurance or reinsurance available from a company. In a broader sense, it can refer to the largest amount of insurance or reinsurance available in the marketplace.
Claim A request for payment of a loss, which may come under the terms of an insurance contract.
Commission A certain percentage of premiums produced that is received or paid out as compensation by an insurer to agents and brokers.
Insurer The party to the insurance contract whom promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.
Interest Money paid for the use of money.
Liquidity The ability of an insurer to convert its assets into cash to pay claims if necessary.
Loss Ratio The ratio of claims to premiums. It may be calculated in several different ways, using paid premiums or earned premiums, and using paid claims with or without changes in claim reserves and with or without changes in active life reserves.
Policy The legal document issued by the company to the policyholder, which outlines the conditions and terms of the insurance also called the policy contract or the contract.
Premium The price of insurance protection for a specified risk for a specified period of time.
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.
Reserve An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders.
Retention The net amount of risk the ceding company keeps for its own account.
Risk Uncertainty as to the outcome of an event when two or more possibilities exist.
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.
Statutory Required by or having to do with law or statute.
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.

For a more detailed glossary of terms/acronyms used as per GCR insurance glossary, please click here

https://globalratings.net/uploads/files/Jubilee_rating_announcement.pdf
GCR affirms The Jubilee Insurance Company of Tanzania Limited’s rating of A+(TZ); Outlook Stable.

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