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Fitch Rates Mutual & Federal Insurance Company Limited 'AAA(zaf)'; Outlook Stable
July 17, 2014 / 3:02 PM / in 3 years

Fitch Rates Mutual & Federal Insurance Company Limited 'AAA(zaf)'; Outlook Stable

(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 Strength (IFS) rating of 'AAA(zaf)'. The Outlook is Stable. KEY RATING DRIVERS Fitch considers M&F as "core" to the Old Mutual group under the agency's insurance group rating methodology, based on its alignment to Old Mutual's 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 credit profile, which is weaker than the IFS rating of Old Mutual Life Assurance Company (South 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 franchise. 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. At end-2013, 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 profitability. 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 margins. The underwriting result is expected to improve in 1H14, as a result of pricing and claims management interventions having been put in place and the absence of natural catastrophe events. From a standalone perspective, M&F's rating benefits from its conservative investment strategy, well-established business positions in its chosen market segments and strong, but declining, capitalisation. RATING SENSITIVITIES 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 of M&F. A downgrade could also be triggered by deterioration in the standalone profile 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. 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 Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available on (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 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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