(The following statement was released by the rating agency) Feb 14 - Fitch Ratings has affirmed Santam Limited's (Santam) National Insurer Financial Strength (IFS) rating at 'AA+(zaf)' and National Long-term rating at 'AA(zaf)'. The Outlooks are Stable. Fitch has simultaneously affirmed Santam's subordinated debt at 'A+(zaf)'. The affirmation reflects Fitch's view that Santam has core status within the Sanlam group. Although Santam's ratings are primarily based on its core status, they also take into account its standalone credit profile. Santam's ratings reflect its robust capital position, improved performance, diversified product offering, well-established distribution network and solid risk management. In addition, the company has a strong and well established position as the largest non-life insurer in South Africa with over 22% market share in terms of gross written premiums. Offsetting factors include the intensely competitive South African market, the tough economic environment and the company's limited diversification outside South Africa. In H111 Santam's performance improved with headline earnings up 16% at ZAR670m. This was driven a strong underwriting performance of ZAR594m (H110: ZAR533m) stemming mainly from the motor and property classes generating substantially higher underwriting profits (increases of 91% and 42% respectively) in H111 compared to the previous year's period. As a result, Santam's underwriting margin improved to 8.4% (H110: 8.0%). Santam maintains a solid capital position. It reported a regulatory solvency ratio (net asset value/net premiums written) of 45% at end-H111 (end-2010: 45%), which is at the high end of the company's long-term target range of 35%-45% and well above the minimum regulatory requirement of 25%. Given Fitch's view that Santam has core status within the Sanlam group, any upgrade or downgrade of Sanlam's ratings could be expected to have a similar impact on those of Santam. In addition, if Santam was no longer seen as a core part of the Sanlam group, as well as a sustained deterioration in Santam's standalone profile in terms of sustained poor operating performance, sustained deterioration of capital levels to below a regulatory solvency ratio of 40% with the current asset mix, and/or weakening of market position (loss of market share), this could lead to a downgrade. (Caryn Trokie, New York Ratings Unit)
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