Fitch downgrades ratings of South African insurers in review
Fitch Ratings has downgraded the insurer financial strength (IFS) ratings of Guardrisk International PCC to 'BBB' from 'BBB+' and RMB Financial Services, RMB Structured Insurance and RMB Structured Insurance PCC (collectively RMBSI) to 'BBB-' from 'BBB'. The outlooks are stable.
The rating changes come after the Fitch completed a review covering six insurance groups within South Africa focused exclusively on the impact of Fitch's downgrade of the South African sovereign rating.
Fitch has simultaneously affirmed the national IFS ratings of Home Loan Guarantee Company NPC, Guardrisk Insurance Company, Guardrisk Life, MMI Group, Liberty Group and Standard Insurance.
On 4 December 2015, Fitch downgraded South Africa's long-term foreign and local currency issuer default rating (IDR) to 'BBB-' from 'BBB' and to 'BBB' from 'BBB+', respectively. The Outlooks are Stable.
Fitch said the downgrade of Guardrisk PCC's IFS rating reflects the cap introduced by the downgrade of South Africa's local currency IDR to 'BBB'. The downgrade of RMBSI's IFS ratings reflects its exposure to the deteriorating South African operating environment as a small niche insurer.
The downgrade of South Africa's IDRs, according to the firm reflects further weakness in GDP growth and estimates of growth potential, an increase in forecast gross general government debt and South Africa's persistent current account deficit. These factors create a weaker operating environment for South Africa-based insurers, thereby weakening their credit profiles, said Fitch.
National scale ratings have not been affected by the sovereign downgrade as the relative credit worthiness of South African insurance groups remains unchanged, in Fitch's view. The main industry-wide risk factors to South African insurers' ratings remain broadly unchanged, in Fitch's view.
A downgrade or upgrade of South Africa's Long-term foreign or local currency IDRs could trigger a similar rating action on Guardrisk PCC's and RMBSI'sIFS ratings, according to Fitch.
