(The following statement was released by the rating agency)
JOHANNESBURG/LONDON, July 17 (Fitch) Fitch Ratings has assigned
Mutual & Federal
Insurance Company Limited (M&F) a National Insurer Financial
rating of 'AAA(zaf)'. The Outlook is Stable.
KEY RATING DRIVERS
Fitch considers M&F as "core" to the Old Mutual group under the
insurance group rating methodology, based on its alignment to
strategy and integration of management into the Old Mutual
group. As a result
M&F's rating is notched up by three levels from its standalone
which is weaker than the IFS rating of Old Mutual Life Assurance
Africa) Limited (OMLACSA) of 'AAA(zaf)'.
M&F has a leading market position as the second largest general
insurer in South
Africa by gross written premium, with a strong domestic
Fitch views M&F's investment strategy as conservative. M&F
maintains a high
level of liquidity with 89% of the balance sheet invested in
cash, money market
and short-duration bonds.
Fitch believes that M&F remains adequately capitalised based on
the agency's own
risk-adjusted assessment and the minimum statutory requirement.
M&F's regulatory solvency ratio decreased to 49% (end-2012:
54%). Fitch expects
solvency to remain strong in 2014, supported by a return to
M&F declared a net loss of ZAR96m in 2013 compared with a net
profit in 2012 of
ZAR286m. This was mainly driven by negative underwriting
underwriting result is expected to improve in 1H14, as a result
of pricing and
claims management interventions having been put in place and the
natural catastrophe events.
From a standalone perspective, M&F's rating benefits from its
investment strategy, well-established business positions in its
segments and strong, but declining, capitalisation.
Given Fitch's view that M&F is "core" to the Old Mutual group,
any upgrade or
downgrade of OMLACSA's National IFS rating would have a similar
impact on that
A downgrade could also be triggered by deterioration in the
to an extent that Fitch would no longer consider M&F as "core"
to Old Mutual.
This could result from sustained poor operating performance,
lower levels of
capitalisation and/or severe weakening in its market share.
+27 11 290 9402
Fitch Southern Africa (Pty) Ltd
23 Impala Road
+44 20 3530 1257
+44 20 3530 1168
Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153,
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
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