MOODY'S CONFIRMS ING GROUP'S RATINGS AT Aa2 FOLLOWING ING'S ANNOUNCEMENT OF RELIASTAR ACQUISITION
Moody's Investors Service has confirmed the Aa2 long-term senior debt ratings of ING Group (ING), following ING's announcement that it will acquire ReliaStar Financial Corporation for $6.1 billion in cash and assumed debt. Moody's also confirmed the Aa2 ratings for ING's affiliates, ING Verzekeringen NV and ING America Insurance Holdings, Inc., as well as the Aa2 insurance financial strength ratings of ING's U.S. life insurance subsidiaries. The outlook on all of the ratings remains negative.
Based in Minneapolis, Minnesota, ReliaStar operates primarily as a writer of individual life insurance, employee benefits, and individual and group annuity products. ING intends to finance the acquisition from existing capital resources, without resorting to additional debt issuance.
In confirming ING's ratings, Moody's commented that ING's acquisition of ReliaStar fits well with the Group's long-term strategic ambition to strengthen its already sizable market position in the Americas. Moody's believes that ReliaStar's life insurance, annuity and employee benefits businesses will broaden ING's U.S. franchise and offer potential synergies with the Group's other main insurance operating units in North America.
Tempering these expected benefits, Moody's said, will be the challenge of maintaining ReliaStar's revenue growth momentum as the company shifts towards more competitive, lower margin asset-accumulation products, and as the financial services industry as a whole comes under increased competitive pressure.
Moody's added that although the total price paid for ReliaStar includes significant goodwill, the magnitude and cost of its investment is moderate in relation to the overall size and scope of activities of ING Group and should not materially effect its current financial fundamentals. Moody's expects the Group will maintain overall moderate financial leverage and strong debt service capacity, although the proposed financing structure of the transaction should reduce ING Verzekeringen's surplus capital.
Moody's also noted that the proposed acquisition of ReliaStar is consistent with ING's strategy of progressively reallocating its surplus capital to acquisitions in its core insurance and banking businesses, and in the process, unwind some of its long-term investments in unaffiliated companies.
The rating agency commented that, going forward, one of the Group's main challenges will be to generate the higher returns expected from its new investments, while maintaining its traditional strong managerial cohesion, sound asset quality and moderate business risk profile. Reflecting these uncertainties, Moody's said that ING's rating outlook remains negative.
The following ratings were confirmed:
ING Group - senior medium term notes at Aa2; subordinated medium term notes at Aa3;
ING Verzekeringen NV- long-term debt at Aa2; short-term rating at Prime-1;
ING America Insurance Holdings - long-term debt, guaranteed by ING Verzekeringen, at Aa2; commercial paper, guaranteed by ING Verzekeringen, at Prime-1;
Equitable of Iowa Companies - senior debt at Aa3; junior subordinated debt at A1; preferred securities at "aa3";
Equitable Life Insurance Company of Iowa - insurance financial strength at Aa2;
Security Life of Denver Insurance Company - insurance financial strength at Aa2;
Southland Life Insurance Company - insurance financial strength at Aa2;
Life Insurance Company of Georgia - insurance financial strength at Aa2;
UGS Annuity and Life Company - insurance financial strength at Aa2;
ING Group NV is based in Amsterdam, The Netherlands, and had assets of ¬493 billion at the end of 1999.
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