Johannesburg, 28 November 2018 — Global Credit Ratings has today downgraded the national scale claims paying ability rating accorded to Lion of Africa Insurance Company Limited to CCC(ZA) from BB-(ZA). The rating has been placed on Rating Watch.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating to Lion of Africa Insurance Company Limited (“Lion”) based on the following key factors:
The rating downgrade to CCC(ZA) follows the announcement on the 13th November 2018 that Lion decided to voluntarily wind down operations with immediate effect. This decision was taken based on a lack of profitability and increased solvency requirements. As a result, the company is in run-off. GCR has placed the rating on Rating Watch in order to observe development of the run-off and its impact on policyholders going forward, and to review the rating over the short term.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (May 2017)|
|Claims paying ability: BBB(ZA)|
|Last rating (July 2018)|
|Claims paying ability: BB-(ZA)|
|Rating Watch: Yes|
|Primary Analyst||Committee Chairperson|
|Susan Hawthorne||Yvonne Mujuru|
|Senior Credit Analyst||Sector Head: Insurance Ratings|
|(011) 784-1771||(011) 784-1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Short Term Insurance Companies, updated May 2018
Lion rating reports, 2017 – 2018
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; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
Lion of Africa Insurance Company 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 Lion of Africa Insurance Company Limited.
The information received from Lion of Africa Insurance Company Limited and other reliable third parties to accord the credit rating included:
- The latest audited financial statements to 31 December 2017
- Four years of comparative audited financial statements to 31 December
- Year to date management accounts to 30 September 2018
- Lion of Africa stakeholder letter, 13th November 2018
- Other relevant documents
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
|Claim||A request for payment of a loss, which may come under the terms of an insurance contract.|
|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.|
|Downgrade||The assignment of a lower credit rating to an insurer by a credit rating agency. Opposite of upgrade.|
|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.|
|Policy||The legal document issued by the company to the policyholder, which outlines the conditions and terms of the insurance.|
|Policyholder||The person in actual possession of an insurance policy.|
|Rating Watch||Indicates that a rating is under review for possible change in the short term and the movement may be either positive or negative.|
|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.|
For a detailed glossary of terms please click here
GCR downgrades Lion of Africa Insurance Company Limited’s rating to CCC(ZA); Rating Watch