Johannesburg, 13 July 2015 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to The Jubilee Insurance Company of Uganda Limited of AA-(UG), with the outlook accorded as Stable. The rating is valid until June 2016.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating to The Jubilee Insurance Company of Uganda Limited (“Jubilee Uganda”) based on the following key criteria:
Capitalisation is a key rating strength for Jubilee Uganda, with risk based capital adequacy maintained at very strong levels over the review period. GCR expects capitalisation to remain elevated over the rating horizon and supportive of the insurer’s short to medium term growth strategy, given the insurer’s solid track record of capital generation, and projected stability in risk exposures.
Jubilee Uganda’s competitive position as the leading player in the short term insurance market impacts favourably on the rating. GCR expects market strength to be sustained over the medium term, supported by the insurer’s strong brand, and established market presence in core portfolios and market segments.
GCR views Jubilee Uganda’s earnings capacity to be very strong. The insurer has consistently generated very strong technical results above market averages, demonstrated by its five-year average combined ratio of 69%. Overall, profitability continues to be supported by an efficient cost structure and strong investment income, which is expected to sustain robust earnings streams going forward.
The insurer displays a low risk investment appetite, with financial assets exposed to market risk representing a limited 6% of FYE14 capital. The conservative investment strategy continues to support a strong liquidity profile. Going forward, stable asset allocation is expected to retain liquidity at sound levels.
Material reinsurance counterparties evidence an intermediate aggregate level of counterparty strength.
Risk premiums evidence a fairly limited degree of diversification, with two lines of business producing material volumes of net premium income. This is, however, partially offset by the low level of product risk and high profit nature of these core books.
An upward rating movement could potentially follow a review of country and industry risks. Conversely, a deterioration in key rating factors, such as a significant and protracted loss in market share, accompanied by a sustained deterioration in profitability, impinging on risk-based capital adequacy, may trigger a negative rating action.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (May 2007)|
|Claims paying ability: A+(UG)|
|Last rating (June 2014)|
|Claims paying ability: AA-(UG)|
|Primary Analyst||Secondary Analyst|
|Sheri Few||Fidelis Masheka|
|Senior Analyst||Junior Analyst|
|(011) 784-1771||(011) 784-1771|
|Sector Head: Insurance Ratings|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Insurance Companies, updated July 2014
Jubilee Uganda rating reports, 2007-2014
The Jubilee Insurance Company of Kenya Limited 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 Uganda 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 The Jubilee Insurance Company of Uganda Limited with no contestation of the rating.
The information received from The Jubilee Insurance Company of Uganda Limited and other reliable third parties to accord the credit rating included:
- The 2014 audited financial statements
- 4 years of comparative audited numbers
- Unaudited interim results as per 31 March 2015
- Budgeted financial statements for 2015
- 2015 reinsurance cover notes
- Other related documents.
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.
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.|
|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 detailed glossary of terms please click here