A Sydney-based insurance giant's overall creditworthiness has been affirmed in S&P Global's latest ratings review.
Insurance Australia Group's (
IAG) “A” issuer-credit rating has remained unchanged, despite a series of reinsurance deals the group-holding company expects would bring them “a number of positive financial effects.” Also affirmed were the “AA-” financial strength and issuer-credit ratings of
IAG's core-operating subsidiaries, including Insurance Australia,
IAG New Zealand,
IAG Re Singapore, and
IAG Re Labuan Berhad.
The outlook for the ratings were all stable.
S&P Global said the affirmations reflect their view that while the quota-share agreements with
Munich Re,
Swiss Re, and Hannover Re “will lead to a material increase in IAG's reinsurance utilization, they will not result in a dilution of the insurer's earnings base or control over its business above the extent we anticipate in the 'AA-' ratings.”
The deals will see the insurer share a combined 12.5% of its consolidated business with the reinsurers from Jan. 1, on a whole-of-account basis, covering IAG's consolidated business in Australia, New Zealand, and Thailand, for an average initial period of more than five years.
The ratings agency also took into account IAG's strong capital adequacy in the affirmations, and “expects that IAG's competitive position and capital adequacy will remain very strong to the end of our forecast period to June 30, 2020.”
Meanwhile, IAG's consolidated subsidiaries,
CGU Insurance,
WFI Insurance,
Swann Insurance, and IAG Re Australia, had their “AA-” financial strength and issuer-credit ratings withdrawn by S&P Global at the request of their parent company. Effective Aug. 1, all policyholder assets and liabilities of the entities were transferred to Insurance Australia, following the July approval for IAG's license consolidation.
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IAG announces quota share with Swiss Re, Munich Re and Hannover Re
IAG completes licence consolidation
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