Fitch Rates Standard Insurance Limited 'AA(zaf)'; Outlook Stable

Mon Aug 4, 2014 10:52am EDT

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(The following statement was released by the rating agency) JOHANNESBURG/LONDON, August 04 (Fitch) Fitch Ratings has assigned Standard Insurance Company Limited's (SIL) a National Insurer Financial Strength (IFS) rating of 'AA(zaf)'. The Outlook is Stable. SIL is the non-life bancassurance operating subsidiary of Standard Bank Group Limited (Standard Bank; National Long-Term Rating 'AA(zaf)'/Stable). KEY RATING DRIVERS SIL's rating is aligned with that of Standard Bank as Fitch believes that Standard Bank would provide support to its subsidiary if needed, given SIL's high level of integration within the bank, its shared branding, alignment with the group's strategy and its profitability. SIL's credit strengths are its strong capitalisation, conservative investment strategy, and consistent profitability. Its small size and lack of business diversification are credit weaknesses. SIL's capitalisation, based on Fitch's risk-adjusted assessment and the company's regulatory solvency position, is strong relative to its peer group. At FYE13 SIL's capital adequacy requirement (CAR) cover on a solvency assessment & management (SAM) interim measures basis was 2.1x, ahead of its peer-group median of 1.9x. SIL's conservative investment strategy comprises maintaining a high level of liquidity, with 82.4% of investments invested in cash and money-market instruments. Overall profitability is sound, as indicated by SIL's strong 2013 underwriting margin of 22.3% (2012: 23.5%) and return on equity of 30.5% (36.9%). This was despite a 5.6% decline in net profit in 2013 to ZAR322m, driven mainly by an increase in weather-related claims. SIL is a small player in the South African insurance market with a market share by gross written premium (GWP) of less than 2%. Its business mix is highly concentrated, with homeowners' building insurance accounting for 71% of GWP. RATING SENSITIVITIES Any change of Standard Bank's ratings is likely to lead to a corresponding change in SIL's rating. A downgrade could be triggered by deterioration in SIL's standalone credit profile to such an extent that Standard Bank might no longer, in Fitch's view, be likely to provide support to SIL if needed. This could result from a sustained poor operating performance, severe weakening in SIL's market share or a significant weakening in its capital position. Contact: Primary Analyst Willem Loots Director +27 11 290 9402 Fitch Southern Africa (Pty) Ltd 23 Impala Road Sandton 2196 Secondary Analyst Harish Gohil Managing Director +44 20 3530 1257 Committee Chairperson David Prowse Senior Director +44 20 3530 1250 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available on www.fitchratings.com (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 13 November 2013, are available at www.fitchratings.com. 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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