|Rated Entity / Issue||Rating class||Rating scale||Rating||Outlook/Watch|
|Grand Reinsurance Company (Private) Limited||Financial strength||National||AA+(ZW)||Stable Outlook|
The upgrade of Grand Re’s rating reflects a credit enhancement on the insurer’s stand-alone credit profile from the policy holder guarantee issued by the parent; Masawara Holdings Mauritius Limited (“MHM”, ‘guarantor’). As a result, the financial strength ratings on Grand re will solely reflect the creditworthiness of the guarantor going forward.
In 2H 20 MHM issued an unconditional, irrevocable guarantee in favour of Grand Re’s policyholder, which will result in MHM paying policyholder obligations owed by Grand Re to “its reinsurance counterparties, should the company be unable to pay upon a claim that has been assessed as due”. A copy of the guarantee will be available on the website of Grand Re as long as it remains in force. GCR has reviewed the guarantee together with the legal opinion, as well as relevant board resolutions, and is satisfied that it meets the relevant conditions of unconditionality, irrevocability, timeliness and ranking in line with MHM’s own creditors.
MHM is an Intermediary Non-Operating Holding Company fully owned by Masawara Plc (“Masawara”). We consider MHM the guarantor to be essential to Masawara PLC, due to the fact that it contributes approximately 58% of ultimate group revenues. In this respect, the company’s credit profile is similar to that of its parent. Masawara’s business profile is sound, underpinned by well-established insurance franchises in Zimbabwe and Botswana which dominate total income, supported by diverse interests in the property and hospitality sectors. Furthermore, the financial profile has been maintained within a healthy range, with the earnings assessment moderating slightly due to the marked impact of the COVID-19 pandemic on the hospitality sector.
The Stable Outlook reflects GCR’s expectations that Masawara’s earnings performance will not reduce below the current range, as the hospitality business recovers from the lockdown from 2H F20 and into FY21. The expected stabilisation of earnings is likely to support largely unchanged capitalisation and liquidity strength over the rating horizon.
Positive rating action may follow material improvements in capitalisation and liquidity of Masawara. Conversely, downward rating movement may follow sustained earnings weakness, and/or reduction in capitalisation beyond expectations.
|Primary analyst||Victor Matsilele||Analyst: Insurance Ratings|
|Johannesburg, ZA||victorm@GCRratings.com||+27 11 784 1771|
|Secondary Analyst||Godfrey Chingono||Deputy Sector Head: Insurance Ratings|
|Johannesburg, ZA||goffreyc@GCRratings.com||+27 11 784 1771|
|Committee chair||Matthew Pirnie||Group Head of Ratings|
|Johannesburg, ZA||matthewp@GCRratings.com||+27 11 784 1771|
Related criteria and research
|Criteria for the GCR Ratings Framework, May 2019|
|Criteria for Rating Insurance Companies, May 2019|
|GCR Ratings Scales, Symbols & Definitions, May 2019|
|Jurisdictional Supplement for Criteria, July 2020|
|GCR Country Risk Scores, May 2020|
|GCR Insurance Sector Risk Scores, June 2020|
Grand Reinsurance Company (Private) Limited
|Rating class||Review||Rating scale||Rating class||Outlook||Date|
|Financial Strength||Initial||National||BBB(ZW)||Stable||September 2009|
|Last||National||AA(ZW)||Rating Watch Evolving||August 2020|
Risk score summary
|Rating components and factors||Risk scores|
|Country risk score||0.00|
|Sector risk score||0.00|
|Management and governance||0.00|
|Premium||The price of insurance protection for a specified risk for a specified period of time.|
|Property||Movable or immovable asset.|
|Provision||The amount set aside or deducted from operating income to cover expected or identified loan losses.|
|Rating Horizon||The rating outlook period|
|Rating Outlook||See GCR Rating Scales, Symbols and Definitions.|
|Rating Watch||See GCR Rating Scales, Symbols and Definitions.|
|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.|
|Security||One of various instruments used in the capital market to raise funds.|
|Unconditional||Not subject to any conditions.|
|Upgrade||The rating has been raised on its specific scale.|
SALIENT POINTS OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of 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 credit rating has been disclosed to the rated entity. 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. The rated entity participated in the rating process via virtual management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The information received from the rated entity and other reliable third parties to accord the credit rating included:
- Audited financial results as at 31 December 2019;
- Four years of comparative audited financial statements to 31 December
- Full year budgeted financial statements for 2020;
- Unaudited interim results to 30 September 2020;
- Masawara Holding Mauritius Limited Guarantee;
- Reinsurance cover notes for 2020; and
- Other relevant documents
Due to severe foreign currency shortages, hyperinflation and significant monetary and exchange control policy changes over the last 12-18 months, in our opinion, the national scale credit ratings on Zimbabwean entities are not directly comparable to credit ratings and risk scores within other markets. Furthermore, outlook statements may fail to capture forward looking trends due to the extreme volatility in the operating environment and audited opinions. See the latest Jurisdictional Supplement for Criteria, published July 2020.