Reuters logo
Fitch Assigns IFS Rating of 'BBB+' to Monticello Insurance Limited
November 22, 2017 / 2:59 PM / 19 days ago

Fitch Assigns IFS Rating of 'BBB+' to Monticello Insurance Limited

(The following statement was released by the rating agency) RIO DE JANEIRO, November 22 (Fitch) Fitch Ratings has assigned an Insurer Financial Strength (IFS) rating of 'BBB+' to Monticello Insurance Limited (MIL) with a Stable Outlook. KEY RATING DRIVERS MIL's IFS rating is driven by expected support from its ultimate parent Vale S.A. (Vale; Long-Term Foreign and Local Currency Issuer Default Ratings, BBB+/Stable). MIL is wholly owned by Vale International S.A. (VISA), which in turn is 100% owned by Vale. Fitch considers MIL a core captive of Vale and therefore equalizes MIL's IFS with Vale's Long-Term IDRs. This is because MIL's mission and goals are tied to Vale's risk management and risk financing strategy, all its business is derived from the parent, it is not viewed as a profit center for the group, but rather, its objective is to improve Vale's efficiency and to support operational and financial optimization efforts. MIL, domiciled in Barbados, is fully integrated with Vale's global risk management function. In accordance with Fitch's insurance rating criteria, Barbados' sovereign and country-related constraints to do not apply to MIL given the support-driven ratings and the fact that the bulk of MIL's investments and revenues are based outside Barbados. Vale provides financial support to MIL in various forms. It gives parental guarantees to the letters of credit written by MIL to its fronting insurers, and timely capital contributions into MIL when the need arose in the past. Most recently, in 2012 and 2013, the group provided USD241 million of capital to MIL, when its capital eroded significantly due to large losses. Since the capital contributions of 2012 and 2013, MIL's capitalization has remained strong and leverage quite low. This was supported by declining business volumes, an increase in retained earnings and non-payment of dividends during this period. Capitalization and leverage ratios could be affected negatively by potential large losses, but Fitch believes parent support would be forthcoming, should there be a need. MIL's profitability has been volatile since 2013 due to large oscillations in the loss ratio in 2014 and 2015. That said, cumulative earnings between 2013 and 2016 totalled USD70 million, which corresponded to about 20% of MIL's assets at end-2016. MIL's administrative expenses and acquisition costs have been broadly stable in this period. MIL's financial income from its investments is a meaningful and stable source of earnings. As of December 2016, MIL's loans to VISA made up 90% of its liquid assets, with the balance being held as cash at 'A' category rated international banks outside Barbados. Loans to the parent company are renewed every quarter, have yields at market rates and are repayable on demand in 10 days. MIL has high liquidity ratios, as the loans to the parent company are considered liquid assets. At December 2016, liquid assets corresponded to 1.8x net technical reserves. MIL's retention ratio (net earned premium/gross earned premiums) has fallen gradually from 98% in 2013 to 73% in 2016. Despite the still relatively high retention ratio, MIL is protected from extremely large losses through its reinsurance contracts. The large contracts are well diversified across a sufficient number of 'A' category rated reinsurers. RATING SENSITIVITIES MIL's IFS rating would be affected by changes in Vale's ratings or in Fitch's assessment of MIL as a core captive insurer of Vale. Contact: Primary Analyst Esin Celasun Director +55 21 4503 2626 Fitch Ratings Brasil Ltda. Praca XV de Novembro, 20 - 401 B Rio de Janeiro, RJ, Brazil Secondary Analyst Eugenia Martinez Associate Director +52 81 8399 9155 Committee Chairperson Donald Thorpe Senior Director +1-312-606-2353 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation 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

Our Standards:The Thomson Reuters Trust Principles.
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