London, 27 May 2016 -- Moody's Investors Service, ("Moody's") has
assigned an Aaa.za national scale insurance financial strength
(IFS) rating to MMI Group Limited (MMIGL). Moody's also assigned
a Aaa.za long-term issuer rating and a Aa2.za rating
to MMIGL's subordinated notes on the national scale.
At the same time, Moody's assigned the following ratings on
the global scale, which serve as the basis for the national scale
ratings: MMIGL IFS at Baa1, MMIGL long-term issuer
rating at Baa2 and MMIGL subordinated notes at Baa3. The outlook
is negative, on a global scale basis, and follows from the
negative outlook for the Government of South Africa (Baa2, negative).
MMIGL is the primary life insurance subsidiary of MMI Holdings Limited
(MMI), a leading insurance group in South Africa, that was
formed in 2010 following the merger of two long-established life
insurance and investment groups, Momentum and Metropolitan.
MMI's primary focus is life insurance and investment products for
the South African market, although the group has been expanding
into other developing markets and building its presence in the non-life
insurance sector.
RATINGS RATIONALE
MMIGL's Aaa.za national scale IFS rating, which is
derived from its Baa1 global scale IFS rating, reflects the insurer's
top tier market position in South Africa, its solid capital position
and its flexible product characteristics which serve to reduce the impact
on the group from stress related to credit pressures at the sovereign
level (Government of South Africa, Baa2, negative).
Moody's added that these strengths are partially offset by the group's
exposure to South Africa, both in the form of its invested assets
and premium income, which is sensitive to the pressure on the domestic
economy, and lower insurance profit margins relative to peers.
MMIGL is the third largest long-term insurer in South Africa,
as measured by total assets in 2015. The group is well positioned
in various segments of the South African market, including the retail-affluent
segment (Momentum Retail), the entry-level segment (Metropolitan
Retail) and the corporate and public sector market (Momentum Employee
Benefits). Distribution capabilities include both independent and
tied agents and advisors, as well as direct channels and a moderate
sized branch network. In addition, the group has a growing
presence outside of South Africa, through its International division,
and is expanding in the health and short-term insurance sectors
in South Africa.
MMIGL is well capitalised with net assets equal to 2.8x the regulatory
requirement (CAR) at December 31, 2015. While the insurer
maintains a solid level of capitalisation, its coverage of the CAR
requirement is on the lower end of its peer group. The group expects
to be compliant with the upcoming SAM capital requirements, that
are intended to follow Solvency II guidelines.
Moody's views the group's credit profile as having a meaningful
link to the South African sovereign and banking system. The primary
reasons for this link include, the significant majority of the group's
invested assets being held in domestic securities, including deposits
with domestic banks, and sensitivity of the group's operating
performance to the South African economy and financial markets.
However, Moody's added that MMIGL's solid capitalization,
together with the flexible liability profile of some of its products,
contributes to lifting the group's credit profile one-notch
above that of the sovereign. In particular, the products'
flexibility offers a relatively high ability to share asset losses with
policyholders by permitting MMIGL the right to retract non-vested
policyholder bonuses, or to utilize funds in the bonus stabilisation
accounts and/or make negative bonus declarations to policyholders.
RATINGS OUTLOOK
The negative outlook on the group's global scale ratings reflects
the negative outlook on South Africa's Baa2 government bond rating.
No outlook has been assigned to the national scale ratings.
WHAT COULD CHANGE THE RATING UP OR DOWN
Moody's stated that the following factors could lead to an upgrade of
the group's ratings on the global scale: (i) an upgrade of
South Africa's sovereign rating, and (ii) diversification
of the group's geographic footprint, related to its invested
assets and policyholder base, that meaningfully reduces is exposure
to South Africa, or other highly correlated regions. Conversely,
Moody's noted that the following factors could lead to a downgrade
of the group's ratings on the global scale: (i) a downgrade
of South Africa's government debt rating and/or a downgrade of the
South African banking sector, (ii) meaningful reduction in the proportion
of its flexible liability products relative to its overall non-unit
linked liabilities, and (iii) failure to maintain regulatory capital
levels, under the upcoming SAM regulations, comfortably above
management's minimum target level.
LIST OF NEW RATINGS
The following new ratings were assigned in this action:
Ratings assigned on the global scale:
MMI Group Limited insurance financial strength at Baa1
MMI Group Limited long-term issuer rating at Baa2
MMI Group Limited subordinated notes at Baa3
MMI Group Limited subordinated note programme at (P)Baa3
Negative outlook assigned on the global scale
Ratings assigned on the national scale:
MMI Group Limited insurance financial strength at Aaa.za
MMI Group Limited long-term issuer rating at Aaa.za
MMI Group Limited subordinated notes at Aa2.za
MMI Group Limited subordinated note programme at Aa2.za
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global Life Insurers
published in April 2016. Please see the Ratings Methodologies page
on www.moodys.com for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189530.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Brandan Holmes
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Antonello Aquino
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns Aaa.za national scale IFS rating to MMI Group Limited; subordinated debt at Aa2.za on the national scale
