Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Email page
Email
print page
Print

Rating Action:

Moody’s affirms Intact Financial’s ratings (Baa1 senior) on announced acquisition of certain RSA operations; outlook stable

18 November 2020

Toronto , November 18, 2020 – Moody's Investors Service has affirmed the Baa1 senior debt rating of Intact Financial Corporation (Intact) and the A1 insurance financial strength (IFS) ratings of Intact's principal Canadian insurance subsidiaries. In the same action, Moody's also affirmed the Baa2 senior debt rating of Intact U.S. Holdings, Inc. (previously OneBeacon) and the A2 IFS ratings of OneBeacon's principal operating subsidiaries. The outlook for Intact's ratings is stable.

These rating actions follow Intact's announcement that the company and Tryg A/S (Tryg) will acquire RSA Insurance Group plc (RSA). Intact would acquire RSA's Canadian, UK and International operations for CAD5.8 billion, while Tryg would acquire RSA's Sweden and Norway operations for £4.2 billion. Both Intact and Tryg would own RSA's Denmark business in a joint venture. Intact plans to finance its portion of the acquisition with CAD4.45 billion in an equity subscription agreement and CAD1.4 billion in additional debt and preferred shares and will assume RSA's debt and closed pension schemes. The company plans to operate RSA's UK and International business under its current brand while the Canadian business will be fully integrated into Intact. The parties expect to complete the transaction in the second quarter of 2021, pending approvals from shareholders and regulators.

RATINGS RATIONALE

The rating agency said that Intact's acquisition of the Canadian, UK and International operations of RSA will diversify the group's revenues and earnings, but is credit negative because RSA's operations have a weaker credit profile and the transaction brings higher financial leverage and significant execution and operational risks, particularly outside of Canada. While RSA's Canadian operation has performed well, the UK and International businesses have been comparably less profitable and will require further actions to improve profitability, consistent with Intact's historical performance. The transaction increases Intact's formidable market share in Canada to 21% from 16%, based on 2019 pro forma gross premiums written, and Intact has a strong track record of integrating Canadian acquisitions.

Upon the transaction's close, Moody's estimates Intact will have pro forma financial leverage of about 40%, based on its adjustments and assumptions, which is high for the rating and reduces the group's financial flexibility. Intact will also assume RSA's sizable UK pension obligation which will require additional cash funding. The stable outlook is based on Moody's expectations that Intact will sustain profitability levels and reduce its acquisition-related leverage to below 35% over the next 36 months.

The affirmation of Intact's ratings reflects the group's excellent market position as the largest Canadian property and casualty insurer, particularly in personal and small- to mid-sized commercial lines; a risk management discipline that has produced good underwriting results and solid reserve adequacy; as well as strong and predictable levels of internal capital generation. Intact's credit strengths are offset by its relatively high financial leverage, high gross exposure to natural catastrophes, regulatory risk in Ontario auto insurance, and execution risk with an active acquisition strategy.

The coronavirus pandemic has led to lower premiums and more volatile investment results for Intact and other P&C insurers. For the first nine months of 2020, Intact reported net operating income of just over CAD1 billion compared with CAD602 million for the prior year period reflecting improved underwriting profitability due to lower claims in personal auto and property, offset by $83 million in coronavirus-related losses.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Factors that could lead to an upgrade of Intact's ratings include: (i) a reduction in both adjusted financial leverage to around 30% and total debt to tangible capital below 45%; (ii) a reduction in high risk assets to invested assets to below 30%; (iii) a sustained increase in Intact's consolidated MCT capital ratio to around 235%; as well as (iv) average return on capital above 10% through a period of softer pricing. Factors that could lead to a downgrade include: (i) a sustained increase in adjusted financial leverage in excess of 35%; (ii) an earnings coverage ratio below 6x for a sustained period; (iii) a reduction in the company's MCT regulatory solvency ratio to below 180%; (iv) an increase in high risk assets to invested assets to more than 40%, or permanent material impairment of the preferred share investment portfolio; and (v) catastrophe losses exceeding one year's worth of earnings.

Intact U.S. Holdings Inc. (previously OneBeacon)

The affirmation of OneBeacon's ratings reflects its specialty focus in several low-to-moderate hazard niche property-casualty segments, as well as its strong producer relationships, and good risk-adjusted capitalization. The rating also reflects one notch of implicit support from Intact, which has a stronger credit profile and a strategic commitment to the North American insurance market which provides OneBeacon with enhanced financial flexibility. Factors offsetting these strengths include reserving risks and underwriting volatility associated with casualty lines, weak, but improving profitability, and modest overall scale in the US specialty lines market.

Factors that could lead to an update of OneBeacon's ratings include (i) an upgrade of Intact's ratings; (ii) explicit support from Intact; and/or (iii) improvement in the standalone credit profile of One Beacon (e.g., more consistent operating profitability, combined ratios in the mid-90% range or below, maintenance of gross underwriting leverage less than 3.5x). Factors that could lead to a downgrade include: (i) a downgrade of Intact's ratings; (ii) reduced implicit support from Intact; and/or (iii) deterioration in the standalone credit profile of OneBeacon (e.g., heightened earnings volatility or a reduction in equity capital by more than 10% as a result of operating losses).

The following ratings have been affirmed:

Intact Financial Corporation:

Senior unsecured regular bond/debenture at Baa1;

Senior unsecured provisional medium term note at (P)Baa1;

Long-term Foreign Currency issuer rating at Baa1.

Intact U.S. Holdings Inc.:

Senior unsecured regular bond/debenture at Baa2

The following insurance financial strength ratings have been affirmed at A1:

Belair Insurance Company Inc.

Intact Insurance Company

Jevco Insurance Company

Nordic Insurance Company of Canada (The)

Novex Insurance Company

Trafalgar Insurance Company of Canada

The following insurance financial strength ratings have been affirmed at A2:

Homeland Insurance Company of Delaware

OBI National Insurance Company

Atlantic Specialty Insurance Company

OBI American Insurance Company

Homeland Insurance Company of New York

The outlook for the ratings is stable.

The principal methodology used in these ratings was Property and Casualty Insurers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187352 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Toronto, Canada, Intact Financial Corporation is the largest property-casualty insurer in Canada, based on 2019 premiums written. The company reported consolidated assets of CAD34 billion and shareholders' equity of CAD9.2 billion at 30 September 2020. Intact reported direct premiums written of CAD9.2 billion and net income of CAD704 million for the first nine months of 2020.

OneBeacon is wholly owned by Intact and property-casualty insurance subsidiaries provide a range of specialty insurance products in the US. As of 31 December 2019, OneBeacon reported assets of $2.5 billion and shareholder's equity of $747 million. For 2019, OneBeacon reported direct premiums written of $1.3 billion and net income of $72.0 million.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 .

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jason Mercer, CFA
VP-Senior Analyst
Financial Institutions Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Sarah Hibler
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody’s investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

Moodys.com