Moody's places ratings of South African insurance groups on review for downgrade
Moody's Investors Service has today placed the global scale Insurance Financial Strength (IFS) and related debt ratings of several South African insurance groups and related entities on review for downgrade.
The affected groups are:
- Old Mutual Life Assurance Company (South Africa) Ltd, (OMLAC(SA)): Baa1, review for downgrade
- MMI Group Limited (MMIGL): Baa1, review for downgrade
- Guardrisk Insurance Company Limited (and related Guardrisk entities): Baa2, review for downgrade
- Standard Insurance Limited (SIL): Baa2, review for downgrade
The insurers' national scale ratings are not affected by this rating action.
Today's rating action follows the review for downgrade of the Baa2 debt rating of the Government of South Africa, which was prompted by the abrupt change in leadership of key government institutions. For details of Moody's rating action and review of the sovereign rating, please see the related press release: Moody's places South Africa's Baa2 ratings on review for downgrade.
Moody's considers these insurance groups' key credit fundamentals (asset quality, capitalisation, profitability and financial flexibility) to be partly correlated with -- and thus linked to -- the economic and market conditions in South Africa, where they are domiciled and have significant operations. Moody's also notes that the IFS ratings of OMLAC(SA) and MMIGL remain above the sovereign rating, reflecting their solid capitalization and the flexible liability profile of some of their products. In particular, the products' flexibility offers a relatively high ability to share asset losses with policyholders by permitting OMLAC(SA) and MMIGL the right to retract non-vested policyholder bonuses, or to utilize funds in the bonus stabilisation accounts and/or make lower future bonus declarations to policyholders.