GCR Affirms NEM Insurance Plc’s Rating of A-(NG); Outlook Positive

17 Dec 2015 In Rating Notifications

GCR Affirms NEM Insurance Plc’s Rating of A-(NG); Outlook Positive

Lagos Nigeria, 17 December 2015 - Global Credit Ratings has affirmed the national scale claims paying ability rating assigned to NEM Insurance Plc of A-(NG); with the outlook accorded as Positive. The rating is valid until October 2016.


SUMMARY RATING RATIONALE

Global Credit Rating (“GCR”) has accorded the above credit rating to NEM Insurance Plc (“NEM”) based on the following key criteria:

The revised outlook reflects NEM’s improved underwriting profile and net profitability in FY14, with this trend continuing for the year-to-date FY15. This was underpinned by a contained loss experience and a relatively competitive cost structure. Overall earnings capacity is considered moderately strong, with the five-year aggregate underwriting margin and return on equity registering at 8% and 15% respectively.

Shareholders’ funds grew by a notable 26% to N5.9bn at FYE14 and corresponded to an improved shareholders’ funds/net written premium (“NWP”) ratio of 71% (FYE13: 59%). While this ratio is forecast to ease in FY15, capitalisation is expected to remain adequate and supportive of the aggressive growth trajectory. Statutory asset coverage of liabilities at FYE14 stood at an improved 1.9x, against a regulatory minimum of 1x.

The relatively conservative investment strategy supports sound liquidity metrics. In this regard, claims cash coverage equated to 19 months at FYE14 from 17 months previously, and improved to 31 months at end-September 2015, while cash cover of net technical liabilities remained flat at 0.9x. Note is taken of a level of asset risk exposure, which has created volatility in earnings stream.

NEM has positioned itself as one of the market leaders within the short term domestic market, supported by a well-established brand and an experienced management team.

The reinsurance programme reflects sound counterparties, while maximum net deductibles per risk and event are limited to moderately conservative levels.

An upward movement in the rating would require sustaining robust profitability trends, while maintaining a conservative investment strategy and an adequate risk adjusted capitalisation. Conversely, a rating downgrade may stem from notable deterioration in capitalisation, liquidity and/ or a protracted weakening in earnings profile.

 
NATIONAL SCALE RATINGS HISTORY

Initial rating (August 2009)
Claims paying ability: A-(NG)
Rating outlook: Stable

Last Rating (February 2015)
Claims paying ability: A-(NG)
Rating outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Adeyinka Olowofela
Credit Analyst
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Committee Chairperson
Dave King
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Short Term Insurance Companies, Updated July 2015
Glossary of Terms/Ratios (February 2015)
NEM rating reports, 2009- 2014


RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S 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.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLI WEB SITE AT:  HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE ON THIS SITE AT ALL TIMES. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT www.globalratings.com.ng


SALIENT POINTS 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.

The rating was solicited by, or on behalf of, NEM Insurance Plc., and therefore, GCR has been compensated for the provision of the rating.

NEM Insurance Plc. 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 above was disclosed to NEM Insurance Plc. with no contestation of/changes to the rating.

The information received from NEM Insurance Plc. and other reliable third parties to accord the credit rating included:

• Audited financial results to 31 December 2014
• Four years of comparative audited numbers
• Unaudited year-to-date results to 30 September 2015
• Budgeted financial statements for 2015
• 2015 reinsurance cover notes
• Actuarial valuation to 31 December 2014
• Other related documents.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. 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.

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.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. 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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