Fitch ratings upgrades Santam to 'AA+(ZAF)'

Santam, South Africas leading short-term insurer, has received a National Insurer Financial Strength Rating of 'AA+(zaf)' with a stable outlook from global rating agency, Fitch Ratings.

The upgrade from last years rating of AA(zaf) reflects the agency's view that Santam occupies a core position within the Sanlam group, as indicated by the Sanlam groups expected increase in its shareholding in Santam.

According to Fitch, an Insurer Financial Strength Rating provides an assessment of the financial strength of an insurance company and its capacity to meet obligations to policyholders and contract holders on a timely basis.

The rating reflects Santam's strong underwriting performance, number one domestic market position and solid capitalisation. Offsetting factors include the increasingly competitive South African market, the impact of a deteriorating claims environment and the company's limited diversification outside South Africa.

Santam has a long history of underwriting profitability and reported a combined ratio of 93.9% for the year ended 31 December 2006 compared to the combined ratio of 91.3% for the previous financial year. The deterioration in the combined ratio was due to the deteriorating claims environment, which was exacerbated by several catastrophic events. For the 2006 financial year, the claims ratio increased to 69% from 65.3% the previous year, but underwriting performance was supported by Santams strong focus on efficiencies, which resulted in its expense ratio improving to 24.9% from 26%.

Santam remains South Africas largest short term insurer - a business position that Fitch expects the insurer to maintain.