(Repeat for additional subscribers)
March 5 (The following statement was released by the rating agency)
Fitch Ratings has affirmed South Africa-based Guardrisk Insurance Company Limited (Guardrisk Insurance) and Guardrisk Life Limited's (Guardrisk Life) 'AA(zaf)' Insurer Financial Strength (IFS) rating. Fitch has also affirmed Guardrisk Insurance's Mauritius-based subsidiary Guardrisk International Limited PCC's (GIL) International IFS rating of 'BBB'. This follows completion of the anticipated acquisition of Guardrisk by the MMI group (MMI; IFS rating of main operating entity: 'AA+(zaf)'/Stable). Guardrisk Insurance, Guardrisk Life and GIL's ratings have been removed from Rating Watch Evolving (RWE) and assigned a Stable Outlook.
Fitch views Guardrisk Insurance, Guardrisk Life and GIL (together referred to as Guardrisk) as "Core" to the Guardrisk group, as defined in the agency's insurance rating methodology. MMI's ratings remain unaffected following the announcement, given the relatively small size of the transaction. Fitch maintained Guardrisk's ratings on RWE on 7 November 2013, following the announcement of MMI's intention to acquire Guardrisk for ZAR1.6bn.
KEY RATING DRIVERS
Fitch views MMI group's ownership as positive for Guardrisk. However, given the very recent conclusion of the acquisition, Guardrisk continues to be rated on a standalone basis, and does not receive any rating uplift from being a member of the MMI group. This situation will be reviewed as potential benefits from being part of the MMI group crystalise.
Fitch believes that Guardrisk would ultimately benefit from being part of the larger MMI group, including access to capital to accept new underwriting opportunities as well as potential cross-selling. Also, MMI is likely to benefit from Guardrisk's strong relationships with corporates and from the contribution that Guardrisk will make to its overall strategic objective of diversifying its business profile. The agency also assesses that there is limited integration risk given the nature and scale of the acquisition.
Fitch considers Guardrisk to be strategically "Important" to the MMI group, as defined under Fitch's insurance rating methodology.
The rating may be aligned to MMI group's rating following the successful integration of Guardrisk, and an increase in Guardrisk's strategic importance to the MMI group, as defined under Fitch's insurance rating methodology. A downgrade may result from a downgrade of the MMI group by more than one notch, or a significant deterioration in the stand alone profile of Guardrisk.