Fitch Ratings Recaps Actions on Australia, NZ Insurers After Review of Coronavirus Impact

(The following statement was released by the rating agency) Fitch Ratings-Sydney-24 May 2020: Fitch Ratings has conducted a review of its ratings on insurers in Australia and New Zealand with respect to the impact of the coronavirus pandemic over the past few weeks, and is recapping the rating outcomes today. The review included nine insurers including insurance groups in the two countries. The Insurer Financial Strength (IFS) ratings on six of the insurers were affirmed with Stable Outlooks. The IFS Ratings on two others were affirmed, but the Outlooks were revised to Negative from Stable. The rating on the last insurer was downgraded and remained on Negative Outlook. The rating actions are based on Fitch's assessment of the impact of the coronavirus pandemic under a set of rating assumptions. These assumptions were used to develop pro-forma financial metrics for the insurance groups, which Fitch compared with the rating guidelines defined in its Insurance Rating Criteria, and with previously established rating sensitivities for the respective insurers. 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. In particular, Fitch took negative rating actions on insurers that were more exposed to the deteriorating economic conditions, including a lenders' mortgage insurer as well as an insurance group with banking exposure, which would be affected by higher unemployment and a worsening housing market. Increasing employee retrenchments could also lead to higher redundancy claims for some insurers. 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. Capitalisation, as measured by the pro-forma Fitch Prism Model Score, moved one to two categories lower for only two insurers compared to their actual 2019 results. In one case, the pro-forma Fitch Prism Model Score implied a downgrade, while the score was commensurate with the current ratings for the others. The impact on insurers' capital positions due the financial market disruption under our rating assumptions is somewhat contained because most of the Fitch-rated insurers in Australia and New Zealand have relatively low risky assets ratios. 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. The pressure on the companies' credit profiles could increase if economic and financial market disruptions are prolonged and materially affect their capital and earnings. The rating actions for the insurance companies' public IFS Ratings were as follows: Ratings Affirmed with Stable Outlooks: - QBE Insurance Group's Issuer Default Rating (IDR) affirmed at 'A-' and QBE's core subsidiaries' IFS Ratings affirmed at 'A+' (Strong). - AIA New Zealand Limited's IFS Rating affirmed at 'AA' (Very Strong). - ClearView Wealth Limited's IDR affirmed at 'BBB' and ClearView Life Assurance Limited's IDR affirmed at 'BBB' and IFS Rating affirmed at 'BBB+' (Good). - First Insurance Limited's IFS Rating affirmed at 'BB+' (Moderately Weak). - MARAC Insurance Limited's IFS Rating affirmed at 'BB+' (Moderately Weak). - Manchester Unity Friendly Society's IFS Rating affirmed at 'BB- (Moderately Weak). Ratings Affirmed with Outlooks Revised to Negative from Stable: - Suncorp Group Limited's IDR affirmed at 'A+', and AAI Limited's IDR affirmed at 'A+' and IFS Rating affirmed at 'AA-'(Very Strong). - Southsure Assurance Limited's IFS Rating affirmed at 'BBB+' (Good). Ratings Downgraded with Outlook Remaining Negative: - Genworth Financial (NYSE:GNW) Mortgage Insurance Pty Limited's IFS Rating downgraded to 'A' (Strong) from 'A+' (Strong). Contact: Kanishka de Silva, CFA Associate Director +61 2 8256 0367 Fitch Australia Pty Ltd Level 15 77 King Street Sydney NSW 2000 Siew Wai Wan Senior Director +65 6796 7217 Jeffrey Liew Senior Director +852 2263 9939 Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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