TEXT-Fitch affirms Ageas Holding & operating companies; revises outlook to stable

Fri Dec 14, 2012 6:31am EST

Related Topics

Fitch has also affirmed Ageas Insurance Company (Asia) Ltd's (AICA) 'A-' IFS rating and 'BBB+' Long-term IDRs, both with Stable Outlooks. Milleniumbcp-Ageas operating entities' (MBCPA) IFS ratings have been affirmed at 'BBB-' with Negative Outlook. A full list of ratings is at the end of this comment.

AG Insurance's ratings continue to be supported by its strong capital adequacy, moderate debt leverage and leading business position in Belgium. Fitch expects AG Insurance's solvency to remain solid and that no exceptional dividend will be paid in the foreseeable future. These strengths are offset by the company's lack of geographic diversification. AG Insurance reported a profit of EUR288m at 30 September 2012 from a EUR441m loss in 2011. Poor profitability levels in 2011 were mainly due to a one-off EUR1.2bn gross impairment on Greek government bonds and to a lesser extent on equity investments. Operating profitability is good and line with expectations with a combined ratio reaching 98.8% in the first nine months of 2012.

The revision of the Outlook indicates that AG Insurance's financial and business profile is fully in line with the rating range. Key rating triggers that could lead to a downgrade include poor profitability or the inability to maintain solvency at the historical level, around 200% of the regulatory minimum. An upgrade of the ratings is unlikely in the medium term, given the company's financial and business profile, in particular its lack of geographical diversification.

The ratings of the Ageas holding companies continue to take into account that they have more cash than needed to repay their debt. Nevertheless, Fitch believes that the holding companies continue to face litigation risk as a consequence of the restructuring of the Ageas group, which is reflected by their IDRs being two notches lower than that of AG Insurance. Following the merger of ageas N.V. with ageas SA/NV, the rating of the holding company ageas N.V. has been affirmed and withdrawn.

AICA's ratings reflect its sound capitalisation, moderate market position and satisfactory operating performance. While AICA has reduced the duration gap associated with an asset and liability mismatch, its statutory solvency capital position remains sensitive to interest rates movement. However, Fitch considers that AICA's risk-based capitalisation is consistent with its current ratings. Key rating triggers that could lead to an upgrade of AICA's ratings include strengthening in its distribution capability. With the rising importance of AICA to the group in Asia, positive rating adjustment could be considered if, in Fitch's view, the company's strategic status within the Ageas Group improves. On the other hand, a decline in the local solvency ratio to a level below 220% over a sustained period could lead to a downgrade.

MBCPA's ratings incorporate some benefit from Ageas Group's ratings and ongoing and expected future operational and financial support. Majority owner Ageas has clearly stated that it continues to view MBCPA as a strategic investment and a long-term partnership and that together with Millennium bcp, owner of the remaining 49% of MBCPA, it would ensure the protection of existing policyholders should this be necessary. The most likely reason for a downgrade would be a downgrade of the Portuguese sovereign rating. A reduction in the level of implied support from the majority owner, Ageas, could also result in a downgrade.

The ratings actions are as follows:

AG Insurance

IFS rating affirmed at 'A+'; Outlook revised to Stable from Negative

Long-term IDR affirmed at 'A'; Outlook revised to Stable from Negative

Ocidental-Companhia Portuguesa de Seguros de Vida S.A.

IFS rating affirmed at 'BBB-'; Outlook Negative

Ocidental-Companhia Portuguesa de Seguros S.A.

IFS rating affirmed at 'BBB-'; Outlook Negative

Medis - Companhia Portuguesa de Seguros de Saude S.A.

IFS rating affirmed at 'BBB-'; Outlook Negative

Ageas Insurance Company (Asia) Ltd

IFS rating affirmed at 'A-'; Stable Outlook

Long-term IDR affirmed at 'BBB+'; Stable Outlook

Ageas Capital (Asia) Ltd

senior unsecured rating affirmed at 'BBB+'

ageas SA/NV

Long-term IDR affirmed at 'BBB+'; Outlook revised to Stable from Negative

Short-term IDR affirmed at 'F2'

ageas N.V.

Long-term IDR affirmed at 'BBB+'; Outlook revised to Stable from Negative; rating withdrawn

Short-term IDR affirmed at 'F2'; rating withdrawn

Ageas Insurance International

Long-term IDR affirmed at 'BBB+'; Outlook revised to Stable from Negative

Short-term IDR affirmed at 'F2'

ageas Finance N.V.

Senior unsecured affirmed at 'BBB'

Ageas Hybrid Financing

Hybrid capital instruments affirmed at 'BB+'

Ageasfinlux SA

Hybrid capital instruments affirmed at 'BB'

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.