Announcements

GCR downgrades international scale ratings of South African insurance companies

Johannesburg, 18 Dec 2015 – Global Credit Ratings (“GCR”) has downgraded the ratings and revised the outlooks of four South African insurance companies, following a recalibration of the mapping tables used for insurers/companies rated in South Africa. The national scale claims paying ability ratings of impacted insurers/companies have all been affirmed.

SUMMARY RATING RATIONALE

The updated mapping table (released publicly by GCR on 14 December 2015) follows a recent revision of the Republic of South Africa’s international scale local currency Issuer Default Rating (from ‘BBB+’ with a Negative outlook to ‘BBB’ with a Stable outlook). Furthermore, the South African country ceiling has been lowered from ‘A-‘ to ‘BBB’.

The rating actions taken do not reflect a change in key rating factors applicable to the credit profiles of the insurers/companies listed below, barring the impact of sovereign risk. Rather, the ratings reflect changes in the mapping between national scale ratings and international scale ratings, as a result of increasing compression in the number of national scale rating notches allocated to each international scale rating notch, as a result of the sovereign downgrade.

GCR will continue to monitor developments related to the sovereign and will respond to any impact on criteria and ratings.

The following rating actions were taken on the international scale claims paying ability (“CPA”) ratings and outlooks:

*Oakhurst Insurance Company Limited is currently under review, with GCR expecting to publicly release the updated rating result by the end of December 2015.

The national scale CPA ratings and outlooks of the following entities were affirmed:

*Oakhurst Insurance Company Limited is currently under review, with GCR expecting to publicly release the updated rating result by the end of December 2015.

ANALYTICAL CONTACTS

Primary Analyst

Marc Chadwick

Sector Head: Insurance Ratings

(011) 784-1771

chadwick@globalratings.net

Committee Chairperson

Sheri Few

Senior Credit Analyst

(011) 784- 1771

few@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Short Term Insurance Companies, updated July 2015

GCR’s South African mapping tables, updated December 2015

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entities, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the ratings are for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

The credit ratings have been disclosed to the entities with no contestation of the rating.

The ratings above were solicited by, or on behalf of, the rated clients, and therefore, GCR has been compensated for the provision of the ratings.

GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S INSURANCE GLOSSARY

Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Credit Rating Agency An entity that provides credit rating services.
Credit Risk The possibility that a bond issuer or any other borrowers (including debtors/creditors) will default and fail to pay the principal and/or interest when due.
Creditworthiness An assessment of a debtor’s ability to meet debt obligations.
Default Failure to meet the payment obligation of either interest or principal on a debt or bond. Technically, a borrower does not default, the initiative comes from the lender who declares that the borrower is in default.
Downgrade The assignment of a lower credit rating to a company or sovereign borrower’s debt by a credit rating agency. Opposite of upgrade.
International Scale Rating (“ISR”) ISRs relate to either foreign currency or local currency commitments, assessing the capacity of an issuer to meet these commitments using a globally applicable (and therefore internationally comparable) scale.
National Scale Rating (“NSR”) The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state.
Principal The total amount borrowed or lent, e.g. the face value of a bond, excluding interest.
Provision The amount set aside or deducted from operating income to cover expected or identified loan losses.
Risk The chance of future uncertainty (i.e. deviation from expected earnings or an expected outcome) that will have an impact on objectives.
Sovereign Risk The risk of default by the government of a country on its obligations.

For a detailed glossary of terms utilised in this announcement please click here

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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