Sept 6 (The following statement was released by the rating agency)
Fitch Ratings has affirmed AIG Life South Africa Limited's (AIG Life SA) and AIG South Africa Limited's (AIG SA) National Insurer Financial Strength (IFS) ratings at 'AAA(zaf)'. The Outlooks are Stable.
KEY RATING DRIVERS
The ratings reflect the link to the parent company, American International Overseas Limited's (AI Overseas; previously known as Chartis Overseas Limited) International IFS rating of 'A'. AIG Life SA and AIG SA's ratings reflect strong formal support agreements provided by AI Overseas, a wholly-owned subsidiary of American International Group, Inc. (Long-Term Issuer Default Rating BBB+/Stable).
In view of the parental support, both companies receive uplift from their standalone ratings. From a standalone perspective, AIG Life SA and AIG SA's ratings benefit from their robust capitalisation, well-established business positions in their chosen market segments and conservative investment portfolios with high levels of liquidity.
AIG Life SA's statutory capital adequacy requirement (CAR) cover ratio remained strong at 7.6x at end-2012 (end-2011: 8.6x), well above the minimum regulatory requirement of 1x cover, comparing well with peers. AIG SA reported a solvency ratio (adjusted equity to net written premiums) of 69% at end-2012 (end-2011: 62%).
AIG SA and AIG Life SA reported a consolidated profit of ZAR48.6m in 2012 (2011: ZAR96.7m). While AIG Life SA continues to report strong net income year on year (2012: ZAR72.4m, 2011: ZAR116.1m), AIG SA's underwriting profitability continues to decline, reflected in a Fitch-calculated combined ratio of 116.6% in 2012 (2011: 113.1%).
Given that both companies' ratings reflect strong formal support agreements provided by AI Overseas, the key rating drivers that could result in a downgrade of AIG Life SA and AIG SA's ratings include AI Overseas ratings being downgraded. Furthermore, a sustained deterioration in both companies' business positions and/or a significant and sustained reduction in capitalisation based on Fitch's assessment or a sustained drop in AIG Life SA's regulatory CAR cover ratio and/or AIG SA's regulatory solvency margin could lead to a downgrade. In addition, withdrawal of the formal support agreements or a change in the nature of the support could lead to a downgrade.