Johannesburg, 07 October 2015 — Global Credit Ratings has today upgraded the national scale financial strength rating assigned to Zimnat Life Assurance Company Limited to A-(ZW) from BBB+(ZW), with the outlook accorded as Stable. The rating is valid until October 2016.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating to Zimnat Life Assurance Company Limited (“Zimnat Life”) based on the following key criteria:
GCR has upgraded Zimnat Life’s national scale financial strength rating on the back of sustained sound operating performance, an improvement in liquidity, and the maintenance of capitalisation at very strong levels.
Capital adequacy has measured at very strong levels over the review period and represents a key rating strength. This has been underpinned by sound growth in the capital base, coupled with containment of underwriting risk exposure (in large a function of the low risk product offerings). GCR expects Zimnat Life to remain adequately capitalised over the rating horizon.
Over the review period, operating profitability has been supported by the insurer’s efficient cost structure and strong investment income, albeit that fair value gains have introduced a concomitantly high level of profit volatility. GCR expects Zimnat Life to reflect sound sustained earnings capacity going forward, albeit with continued potential for fluctuations due to market risk factors.
The insurer’s liquidity metrics have strengthened relative to previous years, following increased investments in short term instruments. Accordingly, cash cover of net benefits and claims improved to 20 months at FYE14 (FYE13: 8 months). Going forward, stable asset allocation is expected to retain liquidity at healthy levels, while management expects to continue focusing on improved asset liability matching.
Zimnat Life continues to reflect a moderately strong competitive position, with increased uptake in select products enhancing premium growth. Going forward, new product offerings and continued efforts to broaden distribution channels are expected to contribute to ongoing revenue development and thus further cement the company’s competitive positioning.
Zimnat Life displays a moderate level of diversification as well as a fairly low level of product risk, with the balance between the two to be maintained over the medium term. Material reinsurance counterparties evidence an intermediate aggregate level of counterparty strength. In addition, the maximum net deductible is viewed to be conservative at less than 1% of FYE14 capital.
Zimnat Life’s national scale rating currently matches GCR’s rating ceiling applicable for the Zimbabwean market. A deterioration in key rating factors, such as weakening in operating performance accompanied by sustained loss in market share, impinging on risk-based capital adequacy, may trigger a negative rating action. Furthermore, should the economic or socio-political outlook deteriorate further, the rating ceiling of the insurance sector may be reviewed.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (November 2011)|
|Financial strength: BBB+(ZW)|
|Last rating (October 2014)|
|Financial strength: BBB+(ZW)|
|Primary Analyst||Secondary Analyst|
|Marc Chadwick||Fidelis Masheka|
|Sector Head: Insurance Ratings||Junior Credit Analyst|
|(011) 784-1771||(011) 784-1771|
|Senior Credit Analyst|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating Long Term Insurance Companies, updated July 2015
Zimnat Life rating reports, 2011-2014
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.
Zimnat Life Assurance 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 Zimnat Life Assurance Company Limited with no contestation of the rating.
The information received from Zimnat Life Assurance Company Limited and other reliable third parties to accord the credit rating included:
- The audited financial statements to 31 December 2014
- 4 years of comparative audited numbers
- Unaudited interim results to 31 March 2015
- Budgeted financial statements for 2015
- 2015 reinsurance cover notes, and
- 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.|
|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 please click here