Fitch Downgrades Sirius' IFS Ratings to 'A-' on Closing on Acquisition; Outlook Stable
OREANDA-NEWS. Fitch Ratings has downgraded Sirius International Insurance Group, Ltd.'s (Sirius) Issuer Default Rating (IDR) to 'BBB' from 'BBB+', senior debt rating to 'BBB-' from 'BBB', and operating subsidiaries Insurer Financial Strength (IFS) ratings to 'A-' from 'A', and removed all ratings from Rating Watch Negative. The Rating Outlook is Stable. A full list of rating actions follows at the end of this release.
KEY RATING DRIVERS
Fitch's downgrade is concurrent with the acquisition of Sirius by China Minsheng Investment Co., Ltd. (CMI) for approximately $2.6 billion. CMI is a private investment company founded in May 2014 by 59 different corporate members from China, and is unrated.
The downgrade was based on the new ownership, which Fitch views as less strategic than that of the prior owner, at a lower level of credit quality and by a company with a limited track record. This creates added uncertainties with respect to Sirius' financial flexibility and access to capital if needed, and business and operating profile, until there is a period of seasoning under CMI ownership.
Favorably, this transaction offers Sirius a better opportunity to grow and expand business in Asia, a market that management has previously targeted for expansion. Moderate growth in Asia would likely be viewed positively, though overly fast growth could be a rating negative.
Underpinning Fitch's ratings is an expectation that under CMI, Sirius' operating performance and capital metrics will not significantly deviate from historical levels.
The ratings also reflect Fitch's current negative sector outlook on global reinsurance, as the fundamentals of the reinsurance sector have deteriorated with declining premium pricing and weakening of terms and conditions across a wide range of lines.
RATING SENSITIVITIES
Key rating triggers that could lead to a downgrade or change to a Negative Outlook to Sirius Group's ratings are:
--Significant changes to the operating profile or investment portfolio that increases risk or reduces liquidity;
--Sizable deterioration in capitalization;
--Financial leverage maintained above 32%.
Key rating triggers that could lead to an upgrade of Sirius Group's ratings include:
--Seasoning of ownership by CMI without any adverse consequences, or perceived weakening in CMI credit profile;
--Improvement in competitive market position while continuing to produce favorable operating results in the challenging reinsurance environment.
FULL LIST OF RATING ACTIONS
Fitch has downgraded the following ratings removed from Rating Watch Negative and assigned a Stable Outlook:
Sirius International Group, Ltd.
--IDR to 'BBB' from 'BBB+';
--$400 million 6.375% due March 20, 2017 to 'BBB-' from 'BBB';
--$250 million perpetual non-cumulative preference shares to 'BB+' from 'BBB-'.
Sirius International Insurance Corporation
Sirius America Insurance Company
--IFS to 'A-' from 'A'.
Комментарии