August 22, 2017 / 8:17 PM / a year ago

Fitch Affirms Intact's Ratings; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, August 22 (Fitch) Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings of Intact Financial Corporation's (Toronto: IFC) (Intact) insurance subsidiaries at 'AA-' (Very Strong). Fitch has also affirmed Intact's senior unsecured debt at 'A-', preferred shares at 'BBB', and Issuer Default Rating (IDR) at 'A'. All of the ratings have a Stable Outlook. A full list of ratings follows at the end of this release. KEY RATING DRIVERS Fitch's rationale for the affirmation of Intact's ratings reflects the company's very strong market position, capitalization, and financial performance. The ratings also reflect anticipated challenges and opportunities of the proposed acquisition of OneBeacon Insurance Group Ltd. (OneBeacon). The acquisition is expected to close in the fourth quarter of 2017, though the company has recently stated it could close in the third quarter 2017. Intact has a history of successful insurance acquisitions in Canada, but this transaction is the company's first entry into the U.S. market. While Intact currently writes several specialty insurance business lines, OneBeacon's is larger and less profitable. Although this transaction presents the company with unique challenges and opportunities, Fitch views it as neutral to the rating overall in the near term. Intact's financial performance is consistently very strong. The company is the largest private p/c insurer in Canada and the number one writer in British Columbia, Quebec, Alberta, Ontario, Nova Scotia, and Newfoundland & Labrador. This size and scale advantage has helped the company generate above industry average profitability. For the first half 2017 (1H17), Intact had an IFRS calendar year combined ratio of 96.6% compared to 95.8% in the prior year period. Intact's financial leverage ratio as of June 30, 2017 was approximately 23% which is above management's long run target of below 20%. A recent increase in leverage is related to the OneBeacon acquisition. Fitch believes management will actively target financial leverage to return to pre-transaction levels within 24 months. RATING SENSITIVITIES Factors that could lead to a downgrade include: --Failure to report an IFRS fixed-charge coverage ratio above 7.0x and financial leverage below 25% within 18-24 months of transaction closing; --Failure to successfully integrate OneBeacon post-close or meet profit objectives, necessitating a material write-down in goodwill; --A minimum capital test ratio falling below 170%; --A material additional acquisition in the next 12-24 months; --Sustained adverse reserve development of more than 3% of prior-year shareholder's equity. Fitch views a near-term rating upgrade of Intact as unlikely. However, factors that could lead to an upgrade include: --Improvement in capital adequacy and leverage measures consistent with 'AA' sector credit factors; --Consistent and sustained financial performance with return on equity in the low- to mid-teens; --Sustained favorable reserve trends; --Sustained financial leverage below 20%. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings with a Stable Outlook: Intact Financial Corporation --IDR at 'A'; --CAD250 million unsecured senior debt 5.41% due Sept. 3, 2019 at 'A-'; --CAD300 million unsecured senior debt 4.70% due Aug. 18, 2021 at 'A-'; --CAD250 million unsecured senior debt 3.77% due March 2, 2026 at 'A-'; --CAD425 million unsecured senior debt 2.85% due June 7, 2027 at 'A-'; --CAD250 million unsecured senior debt 6.40% due Nov. 23, 2039 at 'A-'; --CAD250 million unsecured senior debt 5.16% due June 16, 2042 at 'A-'; --CAD100 million unsecured senior debt 6.20% due July 8, 2061 at 'A-'; --CAD250 million 4.2% non-cumulative class A series 1 preferred stock at 'BBB'; --CAD210 million 3.332% non-cumulative class A series 3 preferred stock at 'BBB'; --CAD40 million 3.169% non-cumulative class A series 4 preferred stock at 'BBB'; --CAD150 million 5.2% non-cumulative class A series 5 preferred shares at 'BBB'; --CAD150 million 5.3% non-cumulative class A series 6 preferred shares at 'BBB'. Intact Assurances Agricoles Inc. Intact Insurance Company Jevco Insurance Company La Compagnie d'Assurances Belair Inc. Nordic Insurance Company of Canada Novex Insurance Company Trafalgar Insurance Company of Canada --IFS at 'AA-'; Outlook Stable. Contact: Primary Analyst Gerald B. Glombicki, CPA Director +1-312-606-2354 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst James B. Auden, CFA Managing Director +1-312-368-3146 Committee Chairperson Julie A. Burke, CFA, CPA Managing Director +1-312-368-3158 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email:; Benjamin Rippey, New York, Tel: +1 646 582 4588, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below