TEXT-S&P summary: Diageo Group Insurance Co. Ltd.

Tue Nov 13, 2012 5:09am EST

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Summary analysis -- Diageo Group Insurance Co. Ltd. --------------- 12-Nov-2012

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CREDIT RATING: Country: Guernsey

Local currency A-/Stable/--

Primary SIC: Surety insurance

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Credit Rating History:

Local currency Foreign currency

01-Sep-2005 A-/-- --/--

27-Oct-2003 A/-- --/--

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Rationale

Diageo Group Insurance Co. Ltd. (DGI) is the wholly owned, Guernsey-based captive subsidiary of the U.K.-based drinks manufacturer Diageo PLC (Diageo; A-/Stable/A-2), and qualifies as a captive insurer under our rating criteria. The ratings on DGI therefore reflect those on its parent.

DGI is regarded as an integral part of the Diageo group's risk management strategy. It is the group's only captive insurer and all its business is sourced from the group. Diageo has maintained a captive strategy since 1983 to minimize the risk-transfer costs of the group, and to increase the emphasis on risk management and loss prevention within the group. In turn, DGI remains wholly reliant on Diageo to preserve its competitive position and financial flexibility. Hence, DGI's fortunes are inextricably linked to those of Diageo.

Outlook

The stable outlook on DGI reflects the stable outlook on Diageo. The ratings and outlook on the parent will determine those on DGI for as long as DGI continues to qualify as a captive insurer under our rating criteria. We anticipate that were DGI to suffer a significant loss, Diageo would promptly deliver additional capital by fully paying up partly paid shares, which supports our rating on DGI. DGI's captive status could be threatened by a weakening in capital adequacy.

Related Criteria And Research

-- Diageo PLC, Nov. 5, 2012

-- Interactive Ratings Methodology, April 22, 2009

-- Rating Captive Insurers, April 13, 2004

-- Use Of CreditWatch And Outlooks, Sept. 14, 2009

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