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Moody's Reviews Vero Insurance Limited For Downgrade

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Fuseworks Media
Fuseworks Media
Moody's Reviews Vero Insurance Limited For Downgrade

Moody's Investors Service has placed the Aa3 insurance financial strength and issuer ratings of Vero Insurance Ltd ("Vero"), and the A2 subordinated debt rating of Suncorp Insurance Funding 2007 Ltd, on review for possible downgrade.

These rating actions follow from the negative outlook placed on the ratings of both entities on 2 March 2009.

There was no impact on the ratings of other rated Suncorp group companies: Suncorp Metway Limited, senior debt ratings of A1 / P-1 with a stable outlook and bank financial strength rating of C+ with a negative outlook; and Suncorp-Metway Insurance Limited, insurance financial strength rating of A1 with a negative outlook.

RATING RATIONALE

Vero Insurance Ltd

"The review for downgrade of Vero's rating reflects the potential for it to upstream capital to its parent, Suncorp Metway Limited, reducing the buffer Vero will have to absorb contingencies " says Wing Chew, a Vice President with Moody's Sydney office. "Nevertheless we expect that on an absolute basis, Vero will continue to have strong capital coverage, comfortably above the regulatory minimum, in line with its articulated risk management strategy".

Suncorp Metway Limited has previously indicated that is reviewing capital targets as part of its general insurance strategy. Moody's notes that Vero is currently operating at a high capital buffer, raising the potential for surplus capital to be up-streamed to its parent.

The review will focus on whether -- given the potential for capital to be reallocated within the group -- it continues to be appropriate to rate Vero higher than its parent Suncorp Metway Limited (A1, stable) and sister company Suncorp-Metway Insurance Limited (A1, negative). In the case of a negative rating action on Vero, it is therefore possible that all major entities within the Suncorp group could be rated at the A1 level for their senior obligations.

Suncorp Insurance Funding 2007 Ltd

Suncorp Insurance Funding 2007 Ltd is a subsidiary of Vero. Its rating is based on the subordinated credit support deed provided by Vero, under which Vero will irrevocably indemnify the noteholders on a subordinated basis if Suncorp Insurance Funding 2007 Ltd fails to pay its obligations. Hence, the ability of Suncorp Insurance Funding 2007 Ltd to pay its obligations relies ultimately on the cash flows generated from the insurance operations of Vero. Consequently the rating of Suncorp Insurance Funding 2007 Ltd has been put on review for downgrade, in line with Vero.

RATING HISTORY

The last rating action in respect of Vero Insurance Limited and Suncorp Insurance Funding 2007 Ltd was on 2 March 2009, when IFSR both entities' rating outlooks were changed to negative, while their ratings were confirmed at Aa3 and A2 respectively.

The principal methodology used in rating Vero Insurance Ltd and Suncorp Insurance Funding 2007 Ltd is "Moody's Global Rating Methodology for Property and Casualty Insurers" published in May 2010. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Vero Insurance Ltd, Suncorp Insurance Funding 2007 Ltd and Suncorp-Metway Insurance Limited are subsidiaries of Suncorp-Metway Limited.

Suncorp-Metway Limited is headquartered in Brisbane, Queensland, Australia. It reported assets of AUD95.3billion at FY2010 ending 30 June 2010.

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