--Foreign and local currency long-term Issuer Default Ratings (IDRs) at 'BBB-', Outlook Stable;
--Foreign and local currency short-term IDRs at 'F3';
--National long-term rating at 'AA+(bra)'; Outlook Stable;
--National short-term rating at 'F1+(bra)';
--National long-term rating of
--National long-term rating of
KEY RATING DRIVERS
The affirmation of the ratings reflects SASA's strong franchise that is led by a significant presence in the health and auto segments, its consistent operating performance throughout economic cycles, adequate liquidity and capitalization, and robust risk management practices. SASA's leverage has been increasing in the recent periods, but still remains consistent with the current ratings.
In 2013, premium and contribution growth was a solid 14% (excluding saving bonds) in line with sector growth. The company remained the second and fourth largest insurer in terms of premiums underwritten, in the health and auto segments respectively, at year-end 2013.
In 2013, SASA's net loss ratio remained stable and broadly in line with peer averages. Quarterly net loss ratios are volatile due to seasonality, and, in part, because SASA is able to make adjustments and pricing relatively quickly. Since 2012, SASA has focused more closely on the profitability of its contracts, rather than market share, and also on claim management, which has started yielding positive results in the recent quarters.
Overall performance remained adequate, albeit slightly lower in comparison to 2012 (ROA was 3.1% and 3.5%, in 2013 and 2012, respectively). Combined and operating ratios remained stable (98% and 94.2%, respectively, in 2013, compared to 98.6% and 93.2%, respectively, in 2012, as calculated by Fitch).
Similar to its local peers, SASA's performance is highly sensitive to changes in interest rates. In the second half of 2013 through
SASA's liquidity was slightly lower than previous years, but was still adequate at
SASA's leverage, measured by the net liabilities/equity ratio, and operating leverage, measured by net earned premiums/equity, is higher than peer averages and continued to rise in 2013 (3.6x and 334%, as calculated by Fitch, respectively). Fitch expects leverage to rise modestly with higher financial debt and continued premium growth until the end of 2014. Leverage ratios are compatible with SASA's ratings, but continued increase could become a negative rating driver in the future.
The regulatory capital ratio (adjusted equity/minimum required capital) of SALIC (SASA's main operating subsidiary) remains adequate. The regulatory ratio declined to 125.7% in 2013 (153.8% in 2012), as a result of rapid premium growth, negative adjustments to securities revaluation reserves, and the acquisition of the capitalization company. The ratio climbed back to 136% as of
SASA follows local regulatory requirements to set technical reserves. It did not make any extraordinary adjustments to technical reserves in 2013 or the first quarter of 2014.
In 2013, SASA's shareholder structure underwent a number of changes. These changes did not have any effect on the ratings, as they do not benefit from support. As a result,
Positive Rating Action: Diversification of the premium base, a sustained decline in the operating ratio to below 85%, and a decline in the net earned premiums/equity ratio to below 250%, could lead to an upgrade.
Negative Rating Action: A sustained and material deterioration in profitability, characterized by an ROA below 0.5%; the deterioration of the liabilities/equity ratio to above 4.0x; an increase in the financial leverage (financial debt/equity) to above 25% for a sustained period; a fall in the operating income/interest expense ratio to below 2.0x; or a significant reduction in the holding's liquidity, could negatively affect the ratings.
Additional information available at 'www.fitchratings.com' or 'www.fitchratings.com.br'.
--'Insurance Rating Methodology' (
--'National Scale Ratings Criteria' (
Insurance Rating Methodology
National Scale Ratings Criteria
Esin Celasun, +55-21-4503-2626
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - 401 B
Source: Fitch Ratings
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