Fitch Ratings-London/Johannesburg-19 July 2011: Fitch Ratings has revised South Africa-based Liberty Group Limited's (LGL) rating Outlook to Stable from Negative and affirmed its National Insurer Financial Strength (IFS) rating at 'AA(zaf)' and National Long-term rating at 'AA-(zaf)'. Fitch has simultaneously affirmed LGL's subordinated debt issue rating at 'A+(zaf)'.
The revision of the Outlook to Stable reflects the structural improvement in how LGL manages its policyholder persistency. Favourably, the company's actual persistency experience has been better than its forecasted experience and no material persistency assumption changes were made in 2010. Fitch recognises that LGL's new business margins remain low as it continues to be adversely affected by the 2008 and 2009 strengthening of persistency assumptions, the impact of fixed cost strain due to reduced sales volumes and the relative increase in acquisition costs. However, Fitch expects some recovery in these margins in H211 following the company's review of actuarial assumptions that will likely be adjusted to reflect the improved persistency experience. As a result, the agency expects LGL's prospects for reporting better earnings to be placed on a stronger footing.
| National Insurer Financial Strength rating |
AA(zaf) |
| National Long-term rating |
AA-(zaf) |
| Rating outlook |
Stable |