SA Eagle maintains its strong credits rating

SA Eagle maintains its strong credits rating

Global Credit Ratings (GCR) has reaffirmed SA Eagles domestic claims paying ability rating of AA+ (double A plus) and, as such, remains one of the most highly rated players in the industry. SA Eagle is a listed subsidiary of Zurich Financial Services (Zurich), which holds a 73.6% stake in the insurer and is rated A+ internationally.

The very high rating stems from the insurers strong position in the domestic short term insurance market, which has displayed exceptional profitability over the past few years. This is further underpinned by SA Eagles strengthening relationship with Zurich, whilst the parents intention of increasing its exposure to Africa was noted. In this regard, a significantly higher dividend of R362m was declared in 2005 in order to bring solvency in line with Zurichs optimal level. Notwithstanding, the insurers international and statutory solvency of 49% and 31% respectively remain comfortable and SA Eagle continues to display a strong and well diversified balance sheet.

However, the industry has begun to report a softening of rates, as increased competitive pressures have begun to mount. Although SA Eagle is positioned in the less rates-sensitive commercial lines market (consisting of small corporates and SMEs), the softening rates environment will place intense pressure on SA Eagle to maintain market share, whilst meeting profitability criteria. In this regard, equity holdings have historically been utilised to boost returns, although this does somewhat expose the insurer to the volatility of the equities market.

SA Eagle - Interim Results 2006

Johannesburg, (August 31, 2006). Short term insurer SA Eagle, a 73.6% owned subsidiary of the Swiss based Zurich Group posted satisfactory half-year results today. Growth in premium revenue continued with an increase of 11.2% to R1,905.8 million (2005: R1,714.7 million). Investment income increased by R8.8 million to R95.2 million (2005: R86.4 million), indicating positive returns in the form of interest and dividend income.

Headline earnings of R72.1 million for the six months were 28.6% lower compared to the same period in 2005. Earnings per share of R130.6 million for the six months were 7.1% lower compared to the same period in 2005, mainly as a result of the higher realised gains and investment income compared to last year.

Managing Director, Nick Beyers commented: Underwriting performance has come under pressure during the period, reflecting a softening of the insurance cycle and a return to more normal claims patterns.

The net underwriting result for the period was R57.3 million (2005: R92.3 million).

Trading conditions for the short term insurance industry in the first half of 2006 have been impacted by a number of factors. The main adverse factors were an increase in fire incidents, hailstorms in KwaZulu-Natal and heavy rains in Gauteng.

The motor account was negatively impacted by an increase in the incidence of accidents and hijackings. While the Company has noted some increase in the cost of repairs for imported vehicles, overall it has largely been able to contain motor repair costs as a result of greater efficiencies and improved controls realised through its motor assessment centres. Nevertheless premium increases, in order to price appropriately for this risk, will be implemented alongside other corrective measures to address profitability.

The solvency margin increased by 6% to 54.0% (2005: 48.3%) and remains above the stated policy of maintaining solvency in the 40% to 50% range. SA Eagle remains financially sound and Global Credit Rating has recently reaffirmed its claims paying ability rating of AA+.

Given the strong solvency position, the Directors have declared an interim dividend of 220 cents per share (2005: 200 cents per share).

While the Directors are confident regarding the Groups prospects for the remainder of the year, the Eastern and Southern Cape floods have already set a more cautious tone. It should be noted that underwriting as well as investment performance fluctuates and, therefore, results for the first six months are not necessarily indicative of the Companys performance for the remainder of the year.

Zurich Financial Services Group (Zurich) is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Founded in 1872, the Group is headquartered in Zurich, Switzerland. It employs approximately 55,000 people serving customers in more than 120 countries.