London, 07 December 2011 -- Moody's Investors Service has downgraded the senior debt rating
of ING Verzekeringen N.V., the holding company for
all the ING Group's insurance activities, to Baa2 from Baa1.
At the same time, Moody's downgraded the guaranteed provisional
senior debt rating of ING America Insurance Holding, Inc.
to (P)Baa2 from (P)Baa1. Moody's assigned a developing outlook
to these ratings.
In the same rating action, Moody's has affirmed the Ba1(hyb)
rating of the subordinated debt issued by ING Verzekeringen, with
a positive outlook, and affirmed ING Verzekeringen's P-2
short-term debt rating, as well as the guaranteed P-2
short-term debt rating of ING America Insurance Holding,
Inc (ING AIH).
The rating action follows the announcement by ING Group of a EUR0.9
-- 1.1 billion reserve charge it expects to take for policyholder
behavior assumption changes related to guarantees in the variable annuity
(VA) block at its US operations. Moody's has commented separately
on the rating implications for ING's US operations. Ratings
at ING Bank and ING NV (the ultimate holding company) and the A1 rating
of Lion Connecticut Holdings, Inc.'s senior debt guaranteed
by ING N.V. are unaffected. A complete list of ratings
affected by this rating action can be found at the end of the press release.
RATING RATIONALE
Commenting on the downgrade of ING Verzekeringen's senior debt rating,
Moody's said that the reserve charge was sizable relative to ING
US operations' earnings and capital, and weakens the US operation's
stand-alone credit quality -- please refer to Moody's
separate press release for further information. Moody's notes
that ING Verzekeringen's other insurance operations -- primarily
in Europe and Asia -- are not directly affected by the reserve charge.
In addition, Moody's notes that some support for the US operations
to offset the reserve charge may come from the wider ING Group.
However, the US still constitutes the largest operation of the insurance
group, accounting for 38% of gross written premiums and 42%
of the underlying result as at H1 2011, and the weakening of the
US operations' credit profile consequently has negative credit implications
for the insurance holding company's debt ratings.
Commenting on the developing outlook on ING Verzekeringen's senior
debt rating, the rating agency said that it reflects the uncertainties
related to the IPO process of ING's insurance operations.
Negatively, the execution risks associated with the separation of
the insurance activities continue to pose pressure on ING Verzekerigen's
rating. Further uncertainty exists with regards to ING Verzekeringen's
ultimate position in the organizational structure following the IPOs.
Positively, the stated intention to reduce leverage and repay debts
of ING Verzekeringen, and the potential profits that could be generated
by the IPOs, could result in an improvement of the holding's
financial flexibility.
The affirmation of ING Verzekeringen's P-2 short-term
rating reflects its Baa2 long-term debt rating, as well as
the potential liquidity support that the company could receive from ING
Group.
The downgrade of ING AIH's provisional senior debt to (P)Baa2 from
(P)Baa1 and affirmation of its P-2 short-term debt rating
mirrors the action on ING Verzekeringen's ratings, as these
debts are guaranteed by ING Verzekeringen.
Commenting on the Ba1(hyb) subordinated debt rating, Moody's
said that this debt is currently rated two notches below the Baa2 senior
debt rating, instead of one notch which is typical in Moody's
notching guidelines. This wider notching continues to reflect the
risk of a coupon deferral associated with the execution risk posed by
ING Group's restructuring process. Nonetheless, the
affirmation of the rating with a positive outlook also reflects the possibility
that this rating may be upgraded, if and when the risk associated
with ING Group's restructuring process ends or diminishes significantly.
Moody's said that ING Verzekeringen's senior debt rating could
be further downgraded if there is additional weakening of the financial
strength of the insurance operations that it holds, or a worsening
of the leverage position of the company. Conversely, the
rating could be upgraded if there is significant improvement of the financial
strength of its insurance operations, or significant deleveraging
and substantial repayment of debt.
LIST OF RATINGS
The following ratings were downgraded and assigned a developing outlook:
ING Verzekeringen -- senior debt rating to Baa2 from Baa1;
ING Verzekeringen -- provisional senior debt rating to (P)Baa2 from
(P)Baa1;
ING America Insurance Holding, Inc. -- provisional senior
debt rating to (P)Baa2 from (P)Baa1 (guaranteed by ING Verzekeringen).
The following rating was affirmed with a positive outlook:
ING Verzekeringen -- subordinated debt rating (dated, cumulative
with optional coupon deferral mechanism) at Ba1(hyb);
ING Verzekeringen -- provisional subordinated debt rating at (P)Ba1(hyb).
The following rating was affirmed with a stable outlook:
Lion Connecticut Holdings, Inc. -- guaranteed senior
debt rating at A1 (guaranteed by ING N.V.)
The following ratings were affirmed:
ING Verzekeringen -- short-term debt rating at P-2;
ING Verzekeringen -- provisional short-term debt rating at
(P)P-2;
ING America Insurance Holding, Inc. -- short-term
debt rating at P-2 (guaranteed by ING Verzekeringen);
ING America Insurance Holding, Inc. -- provisional short-term
debt rating at (P) P-2 (guaranteed by ING Verzekeringen).
The principal methodology used in rating of ING Verzekeringen N.V.
was Moody's Global Rating Methodology for Life Insurers, May 2010.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Based in Amsterdam, ING Verzekeringen N.V. had total
shareholders' equity of EUR19.6 billion as of 30 June 2011.
ING Verzekeringen reported Gross Premiums Written EUR14.5 billion
in the first half of 2011, and a net income of EUR781 million.
REGULATORY DISCLOSURES
Although the following credit ratings have been issued in a non-EU
country which has not been recognized as endorsable at this date,
these credit ratings are deemed "EU qualified by extension"
and may still be used by financial institutions for regulatory purposes
until 31 January 2012. ESMA may extend the use of credit ratings
for regulatory purposes in the European Community for three additional
months, until 30 April 2012, if ESMA decides that exceptional
circumstances arise that may imply potential market disruption or financial
instability. Further information on the EU endorsement status and
on the Moody's office that has issued a particular Credit Rating
is available on www.moodys.com.
ING America Insurance Holding, Inc. :
Provisional senior debt rating to (P)Baa2 from (P)Baa1
Short-term debt rating at P-2
Provisional short-term debt rating at (P) P-2
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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.
The rating for ING Verzekeringen N.V. has been disclosed
to the rated entity or its designated agent(s) and issued with no amendment
resulting from that disclosure.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
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entity, obligation or credit satisfactory for the purposes of issuing
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Benjamin Serra
Asst Vice President - Analyst
Financial Institutions Group
Moody's France SAS
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Simon Harris
MD - Financial Institutions
Financial Institutions Group
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Moody's downgrades ING Verzekeringen's senior debt rating to Baa2; developing outlook
