Fitch Affirms Sul America S.A.'s Ratings; Outlook Stable

  Fitch Affirms Sul America S.A.'s Ratings; Outlook Stable

Business Wire

RIO DE JANEIRO & NEW YORK -- June 7, 2013

Fitch Ratings has affirmed the international and national ratings of Sul
America S.A. (SASA) as follows:

--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 BRL500 million debentures due February 2017 at
'AA(bra)'.

KEY RATING DRIVERS

The affirmation of the ratings reflects SASA's strong franchise led by a
significant presence in the health and auto segments, its consistent and
adequate operating performance throughout economic cycles, good liquidity,
adequate capitalization and solid and continuously evolving risk management
practices.

SASA registered total premium and contribution growth of 13.5% in 2012 (13.7%
in 2011) and maintained its market share through the first quarter of 2013
(1Q'13). In terms of premiums underwritten, it was the second and the fourth
largest insurer in the health (third, if health care operators are considered)
and auto segments, respectively, at year-end 2012.

SASA's net loss ratio improved considerably in the second half of 2012 (2H'12)
as a result of favorable price adjustments in the health segment,
implementation of enhanced underwriting and analysis tools, and increased
focus on profitability. However, it worsened again in 1Q'13 in all segments,
except auto. Further volatility in net loss ratios is likely, but they should
move in tandem with Brazilian sector averages.

Similar to its competitors, SASA's financial income fell in 2012 and 1Q'13,
due to the significant decrease in local interest rates. Further volatility is
expected in financial income considering the concentration of exposure in
floating-rate fixed-income instruments.

Fitch expects combined and operating ratios to remain adequate for the
ratings, despite the considerably lower first-quarter results, and
expectations that financial income will remain low compared to previous years.

SASA did not make any extraordinary adjustment to its technical reserves in
2012 or 1Q'13. The unrealized gains in its securities portfolio (11% of
capital in 1Q'13) could be used to compensate for any additional technical
reserves, if required.

SASA's liquidity remains adequate, with its
liquid-assets-to-technical-reserves ratio at 1.16x at year-end 2012. The
acquisition of the capitalization company, Sul America Capitalizacao S.A.,
concluded in April 2013, has not had a material effect on liquidity. The total
payment made for this company was less than 2% of the liquid assets at
year-end 2012.

The effect of the updated local regulatory rules on SASA's regulatory capital
is relatively small; in Fitch's view, SASA and its subsidiaries will be able
to comply comfortably with them. SASA's leverage ratios are slightly higher
than its peers, but are in line with its ratings. Fitch does not anticipate a
significant increase in leverage, considering its expectations for stable
results and the company's prudent dividend policy.

SASA is 32.8% owned by Sulasapar Participacoes (SULASAPAR), 21.2% by ING
Insurance International BV (ING), 6.7% by individuals, 1.9% by the treasury of
the company and a further 37.3% is in market float. In February 2013, SASA
announced ING would sell its 45% stake in SULASAPAR to SULASA (SULASAPAR's
controlling company). In May 2013 it was announced that ING would sell another
7.9% of its remaining stake to International Finance Corporation (IFC).

Following the completion of the two transactions, which are currently pending
approval from regulatory authorities in Brazil and the Netherlands, ING will
be left with only a direct share in SASA and its overall participation in its
capital will fall from 36.0% to 21.1%. At the same time, the Larragoiti
family's direct and indirect participation will increase from 24.8% to 31.9%.
SASA will stop using the 'ING' brand. IFC will gain the right to designate one
member to the board of directors, which will replace one of the two members
designated by ING.

The change in the shareholder structure is neutral to SASA's ratings, as these
are based on the company's stand-alone profile and do not incorporate
potential support from ING. The transactions are not expected to have any
financial, operational, or commercial effect on SASA at this stage.

RATING SENSITIVITIES

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/capital 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/capital ratio to above 4.0x; 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'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology -- Amended' (Jan. 11, 2013),

--'National Ratings Methodology' (Jan. 19, 2011).

Applicable Criteria and Related Research:

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Insurance Rating Methodology -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698731

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=793164

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst
Esin Celasun
Associate Director
+55-21-4503-2626
Fitch Ratings Brasil Ltda.,
Praca XV de Novembro, 20 - 401 B,
Rio de Janeiro, RJ, Brazil
or
Secondary Analyst
Maria Rita Goncalves
Senior Director
+55-21-4503-2621
or
Committee Chairperson
Julie Burke
Managing Director
+1-312-368-3158
or
Media Relations:
Jaqueline Carvalho, +55 21 4503 2623 (Rio de Janeiro)
jaqueline.carvalho@fitchratings.com
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com