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GCR revises and upgrades Liberty, Heritage Insurance ratings

Johannesburg’s ratings agency Global Credit Rating, (GCR) has reviewed and upgraded listed Liberty Kenya Holdings long-term and short-term insurance firms’ Liberty Life and Heritage Insurance’s national scale financial strength ratings, formerly claims paying ability, to AA (KE), from AA- (KE).

Both firms were accorded a stable outlook status following a revision of GCR’s Criteria for Rating Insurance Companies released in May 2019. Liberty Life Kenya and Heritage Kenya ratings were placed under ‘Under Criteria Observation’ in the period of the rating review.

The positive ratings for Liberty and Heritage according to GCR, were due to solid earnings generation and supported risk adjusted capitalization underpinned by prudent capital management practices.

According to GCR, Liberty’s earnings are supported by a quality book that evidences a favorable operating performance, with the majority of products reporting profits in FY18 which supported a solid average operating margin of 17% and a return on revenue of 36% over the review period. This is largely a function of robust internal capital models that support capital growth and a low risk content operating structure. In this regard, growth in capital and statutory reserves averaged 18% over the past five years, while underwriting, market and credit risk exposures have been well contained. Risk adjusted capitalization is expected to be maintained at strong levels over the outlook horizon, with a statutory capital adequacy requirement ratio of 228% (FY16: 161%) evidencing sufficient headroom to withstand market shocks at rating adequate levels.

The rating agency said Heritage stable outlook reflects expectations of capital and earnings strength over the outlook horizon, while the business profile is expected to withstand competitive pressures over the short term. This was further supported by increased profit retention, with limited dividend distributions over the last two years. Accordingly, the adjusted international solvency margin equated to a high 86% at FY17 (FY16: 65%). Risk adjusted capital adequacy may remain within a very strong range over the outlook horizon, supported by strong internal capital generation.

“Despite the prevailing demanding operating environment occasioned by the macro-economic and regulatory environment, this rating vindicates our assertion that the group’s fundamentals are in place to deliver sustainable earnings,” said Abel Munda, Liberty Life’s Managing Director.

“This year’s improved rating is testament to our business growth by enhancement in the quality of business we write and ultimately the volume growth.” added Godfrey Kioi, Managing Director of Heritage Insurance Kenya.

GCR accounts for the majority of all ratings accorded on the African continent. Through its local presence in Mauritius, South Africa, Nigeria, Kenya and Zimbabwe, GCR has the largest rating team in Africa which gives it unmatched on-the-ground presence, as well as easy access to market participants.