The capital strength of insurers in Australian and New Zealand is expected to remain stable despite the financial impact of the COVID-19 pandemic, according to Fitch Ratings in its latest review.
The ratings agency recently conducted a review of its ratings with respect to the economic impact of the COVID-19 pandemic over the past few weeks. The review included nine insurers in the two countries.
“Fitch expects the insurers' financial performance and earnings to deteriorate as a result of the economic fallout from the pandemic, especially via higher claims and lower investment yields,” Fitch said in a statement. “[However], we expect the capital strength of the Australian and New Zealand insurers rated by Fitch to remain stable despite the pandemic shock, based on our pro-forma analysis.”
In the review, Fitch affirmed the “Insurer Financial Strength” (IFS) ratings of six of the insurers with “Stable Outlooks.” The IFS ratings of two others were affirmed, but their outlooks were revised to “Negative” from “Stable.” Meanwhile, the rating of the last insurer was downgraded and remained on “Negative Outlook.”
Among insurers with stable outlooks are QBE Insurance Group (with “Issuer Default Rating” (IDR) affirmed at “A-“) and QBE's core subsidiaries (IFS ratings affirmed at “A+,” or “Strong”); AIA New Zealand Limited (IFS rating affirmed at “AA,” or “Very Strong”); ClearView Wealth Limited (IDR affirmed at “BBB”) and ClearView Life Assurance Limited (IFS rating affirmed at “BBB+,” or “Good”); First Insurance Limited (IFS rating affirmed at “BB+,” or “Moderately Weak”); MARAC Insurance Limited “IFS rating affirmed at “BB+,” or “Moderately Weak”); and Manchester Unity Friendly Society (IFS rating affirmed at “BB-,” or “Moderately Weak”).
Meanwhile, insurers whose ratings were affirmed with outlooks revised to negative from stable include Suncorp Group Limited (IDR affirmed at “A+”) and AAI Limited (IDR affirmed at “A+” and IFS rating affirmed at “AA-“, or “Very Strong”); and Southsure Assurance Limited (IFS rating affirmed at “BBB+,” or “Good”).
Finally, the lone insurer downgraded with outlook remaining negative was Genworth Financial Mortgage Insurance Pty Limited (IFS Rating downgraded to “A,” from “A+”).
“The ultimate implications of the pandemic on the insurers' credit profiles are unclear, and Fitch will continue to monitor the developments of the rated insurers,” Fitch said. “The pressure on the companies' credit profiles could increase if economic and financial market disruptions are prolonged and materially affect their capital and earnings.”