Press Releases

S&P Reaffirms ATI’s ‘A/Stable’ Rating – Maintaining its Status as the Highest Rated African Insurer

NAIROBI, 19 October 2012 – International rating agency Standard & Poor’s (S&P) reaffirmed the African Trade Insurance Agency’s (ATI) (A/Stable) credit rating citing “very strong capitalization, strong financial flexibility and investments, and strong liquidity”. The rating reinforces ATI’s status as Africa’s highest rated insurer and second highest rated financial institution.

It’s important to note that ATI’s renewed rating is significant for a unique reason, notes ATI’s Chief Executive Officer, George Otieno. ATI operates in a region where a majority of its member countries have ratings that are less than investment grade, “our rating provides a benefit to these countries, who can essentially offer the ATI rating in place of their own when they are trying to attract investors – this is essentially the function of an ATI-backed guarantee.”

Due in part to a disciplined management strategy, which the report refers to as “clear and focused”, ATI has been able to maintain an investment grade rating for the fifth consecutive year – despite the potential impact of negative economic factors such as the 2008 global financial crisis and ensuing challenges in the Eurozone.

ATI’s capital adequacy is the strongest component, being rated “extremely strong” based on a total shareholder’s equity of $151 million (at 30 June, 2012), representing 28% of gross and 56% of net outstanding underwriting commitments, which is well within the range of ATI’s internal underwriting benchmark.

On financial flexibility, ATI received a “strong” rating supported by a preferred creditor arrangement with its African member countries. Under the agreements, any political risk losses caused by a member are fully recoverable from their government. This position, which acts as a shield against losses, has been one of ATI’s most important assets helping it attract international insurers and other partners to the continent and ultimately providing over $7 billion worth of support to trade and investments in Africa over the past decade.

The report also outlines key risks to ATI’s “Stable” outlook, such as high industry and economic risks in the region, and a withdrawal of member support and capital. ATI is able to balance both risks with a strong enterprise risk management system which has “appropriate controls for its key underwriting and investment risks”. ATI’s risk appetite is focused on underwriting political risk in its member countries with the commercial business limited to 30% of net exposures. ATI is only exposed to a maximum single net loss of $15 million for political risks and $5 million for credit (commercial) risks.

According to Standard & Poor’s, credit ratings are forward-looking opinions about credit risk. S&P’s credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time.

Ratings are provided by organizations such as Standard & Poor’s, commonly called credit rating agencies, which specialize in evaluating credit risk.

Each agency applies its own methodology in measuring creditworthiness and uses a specific rating scale to publish its ratings opinions. Typically, ratings are expressed as letter grades that range, for example, from ‘AAA’ to ‘D’ to communicate the agency’s opinion of relative level of credit risk.

Standard & Poor’s Rating Guide

Rating	Definitions
AAA	Extremely strong capacity to meet financial commitments. Highest Rating.
AA	Very strong capacity to meet financial commitments.
A	Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
BBB	Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
BBB-	Considered lowest investment grade by market participants.
BB+	Considered highest speculative grade by market participants.
BB	Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
B	More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
CCC	Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
CC	Currently highly vulnerable.
C	Currently highly vulnerable obligations and other defined circumstances.
D	Payment default on financial commitments.

Note: Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

Specific ratings are also available from Standard & Poor’s Ratings Desk by emailing ratings_request@standardandpoors.com
For the full S&P analysis on ATI’s rating