SLI3/ SLI4 - Credit Rating Action by Standard & Poor's
SANLAM LIFE INSURANCE LIMITED
Registration number 1998/021121/06
Bond Code: SLI3
ISIN No: ZAG000107905
Bond Code: SLI4
ISIN No: ZAG000138629
CREDIT RATING ACTION BY STANDARD & POOR’S
Notice is hereby given in terms of the Debt Listings Requirements of the JSE Limited that Standard and
Poor’s (S&P) has on 7 April 2017 downgraded the ratings of a number of South Africa-based Insurers and
Reinsurers following similar action on the South African Sovereign, which was downgraded on 3 April 2017.
On 3 April 2017, S&P lowered its foreign currency sovereign ratings on the Republic of South Africa to
‘BB+/B’ from ‘BBB-/A-3’ and its local currency sovereign ratings to ‘BBB-/A-3’ from ‘BBB/A-2’. As a result,
Sanlam Life’s South Africa national scale rating was reduced from ‘zaAAA’ to ‘zaAA-‘, and the ratings of the
SLI3 and SLI4 subordinated deferrable debt issued by Sanlam Life from ‘zaAA-‘ to ‘zaA’. The lower ratings
reflect S&P’s view that South African insurers face increased exposure to credit risk within asset portfolios
following the sovereign downgrade, with the increased risk somewhat mitigated by sound balance sheet
resilience. S&P also noted that they believe that the South African insurers would withstand the stress
associated with a foreign currency sovereign default, if one was to occur.
Sanlam Life’s solvency position remains sound, as reflected in a Capital Adequacy Requirement (“CAR”)
cover ratio of 5.8 times at 31 December 2016. Sanlam Life’s solvency cover ratio under the new Solvency
Assessment and Management (“SAM”) regime currently being implemented in South Africa was also a
particularly strong 3.1 times at 31 December 2016. The S&P rating actions on the Republic of South Africa
and Sanlam Life are not expected to have a significant impact on Sanlam Life’s or the Sanlam Limited
Group’s solvency position under the current and future SAM solvency regimes due to the well-diversified
nature of the balance sheets. It is therefore also anticipated that the capital allocation to the Sanlam
operations, including Sanlam Life, and the level of available discretionary capital will remain unaffected by
the rating actions. Sanlam remains well capitalised, with a solid strategy and a track record of delivering
value to our clients, shareholders and other stakeholders despite challenging operating conditions,
supported by a well-established and mature risk management process.
A sovereign ratings downgrade has been anticipated for some time, with the Sanlam Life balance sheet
being well-protected by its approach to closely match the asset and liability profiles of interest-rate sensitive
policyholder portfolios, as well as the move towards a de-risked asset allocation strategy initiated for the
shareholders’ capital portfolio at the end of 2015. Stress testing is conducted on a regular basis as part of
Sanlam Life’s risk management and capital modeling processes to ensure that its capital and liquidity
positions remain robust subsequent to a stress event such as a sovereign ratings downgrade. Further risk
management actions will be considered proactively as part of this process in response to anticipated
developments in the operating environment.
Further details regarding the rating action is available on S&P’s website or in its press release entitled
“Various Rating Actions Taken on South Africa-Based Insurers and Reinsurers Following Sovereign
11 April 2017
Absa Bank Limited (acting through its Corporate and Investment Bank division)
Date: 11/04/2017 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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