GCR Ratings has affirmed Phoenix of Tanzania Assurance Company Limited’s national scale financial strength rating of AA-(TZ), with the outlook accorded as stable.
In a recent statement, GCR said Phoenix Tanzania demonstrates a very strong liquidity position, supported by conservative asset allocation coupled with review year reduction in net technical liabilities.
“Accordingly, cash and stressed financial assets coverage of net technical provisions improved to 6.1x in 2019 (FY18: 4.6x), while coverage of operational cost requirements equated to 44 months (FY18: 48 months),” South African based rating agency said.
The GCR report said looking ahead, the liquidity ratio is expected to slightly moderate, albeit remaining above 5.0x coverage following management’s plan to increase investment in long-dated, higher yielding government securities.
“Risk adjusted capitalisation is viewed to be strong, evidenced by a stable GCR capital adequacy ratio of 4.4x, underpinned by sustained earnings generation and full profit retention. Nevertheless, the insurer’s capital quality is viewed negatively due to a material exposure to investment property, which accounted for 40 percent of the entity’s capital at FY19,” the report added.
From a statutory solvency standpoint, the underwriter met the minimum regulatory requirement closing with a solvency position of 10x at FY19. GCR expects capital strength to be sustained over the rating horizon, underpinned by sound earnings generation and retention, the report explained.
“Earnings are assessed to be strong, reflected by positive average underwriting profitability and sustained healthy investment income. As such, the insurer posted an improved review period aggregate underwriting margin of 5.3 percent (prior review period average: 3.5 percent), while the return on revenue was sustained above 30 percent,” the GCR report stated adding that earnings are expected to slightly improve given observed growth in profitable lines of business, along with expectations of sound investment income generation...read more on https://epaper.ippmedia.com