GCR downgrades Lion of Africa Insurance Company Limited’s rating to CCC(ZA); Rating Watch

28 Nov 2018 In Rating Notifications

GCR downgrades Lion of Africa Insurance Company Limited’s rating to CCC(ZA); Rating Watch

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)    
Outlook: Stable    
     
Last rating (July 2018)    
Claims paying ability: BB-(ZA)    
Rating Watch: Yes    

ANALYTICAL CONTACTS

Primary Analyst   Committee Chairperson
Susan Hawthorne   Yvonne Mujuru
Senior Credit Analyst   Sector Head: Insurance Ratings
(011) 784-1771   (011) 784-1771
.(JavaScript must be enabled to view this email address)   .(JavaScript must be enabled to view this email address)

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

 

 

 

 

 

 

 

 

 

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GLOBALRATINGS.NET/UNDERSTANDINGRATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GLOBALRATINGS.NET/RATINGSINFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE.

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