Capital Markets

ICEA Life gets top rating after Sh6bn capital boost

ICEA

ICEA Lion Asset Management CEO Einstein Kihanda. PHOTO | SALATON NJAU | NMG

South Africa rating firm Global Credit Rating (GCR) has upgraded ICEA Lion Life Assurance to triple-A after its parent firm raised Sh6 billion from its shareholders.

This rating is assigned to companies with the lowest credit risk. The life business was bumped up from the previous double A-rating which indicates the highest certainty of settling short-term liabilities on time.

GCR says the new rating is based on the new capital raised by the subsidiary’s parent firm ICEA Lion Holdings.

“The rating is underpinned by ICEA LION Holdings’ solid financial profile, reflecting very strong capitalisation and above-average earnings. This is further bolstered by the group’s top-tier market position, coupled with a well-diversified revenue base,” GCR said.

“In this respect, the group’s capital base closed higher at Sh28.3 billion (2020: Sh19.5 billion), buttressed by a review year injection of Sh6.1 billion and healthy earnings retention.”

Details of the cash infusion were not immediately available but among recent transactions at ICEA is the sale of a 24.1 percent stake to LeapFrog Strategic Africa Investments (LSAI).

LSAI is a joint venture between private equity firm LeapFrog Investments and American financial services firm Prudential Financial Inc.

With a statutory capital adequacy ratio (CAR) of 316 percent in 2021, ICEA LION Life Assurance continued to measure well above that of its peers and the prescribed capital requirement of 200 percent.

It becomes one of the most highly rated insurance companies in Kenya alongside ICEA Lion General, Zep Re, and AIG Kenya.

The Insurance Regulatory Authority (IRA) is expected to enforce stricter capital requirements of 200 percent (previously 100 percent) of the prescribed capital ratios.

When IRA last issued a review on compliance nearly 20, or a third of the 56 licensed insurance companies had failed to comply with capital requirements.

The risk-based capital adequacy is meant to reduce cases where companies are unable to pay insurance claims.

Some strong insurers have started the process of complying with the stricter capital requirements, providing more than 100 percent of the minimum levels as they seek to hit the 200 percent threshold.