Subscribers are notified that GCR has withdrawn Real Insurance Company Limited’s (“Real Kenya”) domestic claims paying ability rating of BB-(KE).
At the last rating review in August 2012, GCR downgraded Real Kenya’s domestic claims paying ability rating to BB-(KE) from BBB(KE) previously. The downgrade followed the determination that Real Kenya reflected significant counterparty risk associated with intergroup transactions. In this regard, substantial outstanding amounts due from Real Kenya’s parent (87% of FYE11 capital), largely relating to proceeds on the sale of two properties concluded towards the end of F10, notably elevated capital and liquidity risk (F11 adjusted solvency: 9%). Further, while the strategic importance of Real Kenya to the group was noted, consideration was also taken of the very weak liquidity position of the holding company as at FYE11, which severely undermined its ability to meet its obligations to its subsidiaries. As indicated by management at the last rating review, the group committed to repaying the owing balances by year end F12, and accordingly, GCR placed the rating on Rating Watch and has continued to monitor these developments.
Management of Real Kenya recently advised GCR that the aforementioned outstanding intergroup balances due to the insurer have not been repaid, which is of concern. Furthermore, additional information requested by GCR in order to undertake a review of Real Kenya’s financial position to year end 2012 has not been forthcoming by management. In this regard, as GCR cannot attest to the current financial well-being of Real Kenya, GCR has withdrawn its rating effective immediately.
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.