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Fitch Affirms South Africa's Santam at IFS 'AA+(zaf)'; Outlook Stable
March 12, 2015 / 3:57 PM / 3 years ago

Fitch Affirms South Africa's Santam at IFS 'AA+(zaf)'; Outlook Stable

(The following statement was released by the rating agency) JOHANNESBURG/LONDON, March 12 (Fitch) Fitch Ratings has affirmed South Africa-based Santam Limited's (Santam) National Insurer Financial Strength (IFS) rating at 'AA+(zaf)' and National Long-term rating at 'AA(zaf)'. The Outlooks are Stable. Fitch has simultaneously affirmed Santam's subordinated debt at 'A+(zaf)'. KEY RATING DRIVERS The ratings reflect Santam's "Core" status within the Sanlam group, under Fitch's insurance group rating methodology. The ratings also reflect its standalone credit profile, which is consistent with Sanlam Life Insurance Limited's IFS rating of 'AA+(zaf)'. Santam is the largest general insurer in South Africa, with a strong domestic franchise. At end-2014 Santam increased its gross written premiums by 10% to ZAR22.7bn, having weathered strong competition and a difficult economic environment. Fitch believes that Santam remains adequately capitalised based on the agency's own risk-adjusted assessment and the regulatory statutory requirement. At end-2014, Santam's solvency ratio improved to 46% (end-2013: 42%; end-2012: 41%), which is above the company's target range of 35% to 45%. Santam has foregone the payment of a special dividend in 1H15 in order to maintain a degree of capital headroom in anticipation of the implementation of Solvency Assessment and Management (SAM) on 1 January 2016. Fitch views this conservative approach positively. Net profit improved 42% to ZAR1,667m in 2014, supported by an improved underwriting result and higher interest rates. Santam's improved combined ratio of 91.3% (2013: 97.2%) was mainly attributed to a turnaround in the crop insurance business and the absence of hail-related catastrophe events in 4Q14. Santam has a long history of strong underwriting profitability, with a 10-year average combined ratio of 93.7%, which compares favourably with peers. RATING SENSITIVITIES Given Fitch's view that Santam is "Core" to the Sanlam group any upgrade or downgrade of Sanlam's ratings would have a similar impact on those of Santam. A downgrade could also be triggered by deterioration in the standalone profile to an extent that Fitch would no longer consider Santam as "Core" to Sanlam. This could result from a sustained weak operating performance and/or severe weakening in Santam's market share. Contact: Primary Analyst Willem Loots Director +27 11 290 9402 Fitch Southern Africa (Pty) Ltd 23 Impala Road Johannesburg 2196 Secondary Analyst Harish Gohil Managing Director +44 20 3530 1257 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available at (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. Applicable criteria, 'Insurance Rating Methodology', dated 4 September 2014 are available at Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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