San Cristóbal is the property and casualty insurance company of the San Cristóbal Seguros Group in Argentina , which also owns San Cristóbal Seguros de Retiro, a retirement insurer and holds the majority stake (71.7%) in Asociart ART, a monoline workers' compensation insurer.

RATINGS RATIONALE

The affirmation of San Cristóbal's B2 GLC IFS rating primarily reflects the general maintenance of its key credit strengths, including its adequate market position and brand recognition and sound financial performance. It also captures certain challenges, such as the company's concentrated exposure in the automobile line of business, the poor credit quality of its investments and Argentina's weak and volatile operating environment.

The main driver of the upgrade of the IFS rating to A1.ar from A2.ar on the Argentine national scale, was San Cristóbal's improving profitability and capitalization, combined with an improvement in internal controls, including replacing its small, regional external auditor with a mid-size international firm.

San Cristóbal is the sixth-largest property and casualty insurer in Argentina, with an approximate 5% market share of gross premiums written as of 30 June 2012, excluding the workers' compensation segment. It is the third-largest automobile insurer -- the country's largest insurance segment -- with about 6% share of that market. In addition to its strong market presence, San Cristóbal's profitability has improved in the past three fiscal years driven mainly by the company's business growth and higher investment yields, and to a lesser extent by a reduction in its underwriting losses. These profitability improvements, coupled with regular capital contributions from its policyholders, have strengthened San Cristóbal's gross underwriting leverage, which has fallen to 3 times as of 30 June 2012 from 6.3 times as of 30 June 2009.

Nevertheless, the global rating remains constrained primarily by the firm's concentration in the highly competitive and volatile automobile insurance market, which accounts for 76% of net premiums written, and by its high exposure to Argentine sovereign bonds and local bank deposits, which represent more than 100% of shareholders' equity, though this metric is coming down as capitalization improves. In addition, San Cristóbal's high dependence on investment returns for profitability and the weak and volatile Argentine operating environment constrain the global rating.

The following factors could prompt an upgrade of San Cristóbal's ratings: 1) further improvement in underwriting results (i.e., combined ratios consistently below 90%), 2) a more diversified business composition with a lower concentration in automobile insurance, and 3) an upgrade of the Argentine sovereign bond rating or improvement in the country's operating environment. Conversely, the following would place downward pressure on the company's ratings: 1) significant and sustained deterioration in profitability (e.g., return on capital consistently below 10%), 2) gross underwriting leverage sustained above 10 times of shareholders' equity on a consolidated basis, 3) significant and sustained reduction in market share, or 4) significant deterioration in Argentina's government bond rating and/or the country's operating environment.

Based in Rosario, Argentina, for the fiscal year ended 30 June 2012, San Cristóbal Seguros reported a net profit of AR$270 million, gross premiums of approximately AR$1,390 million and shareholders' equity of AR$1,034 million.

Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".ar" for Argentina. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in March 2011 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

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Alejandro Pavlov Vice President - Senior Analyst Financial Institutions Group Moody'sLatin America Ing. Butty 240 16th Floor Buenos Aires City C1001AFB Argentina JOURNALISTS: (800) 666 -3506 SUBSCRIBERS: (5411) 5129 2600 Robert Riegel MD - Insurance Financial Institutions Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Latin America Ing. Butty 240 16th Floor Buenos Aires City C1001AFB Argentina JOURNALISTS: (800) 666 -3506 SUBSCRIBERS: (5411) 5129 2600 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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