Thursday 19th July 2018
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Fitch Ratings flagged a downgrade for New Zealand-based Credit Union Insurance Ltd, trading as Co-op Insurance NZ, citing uncertainty about the proposed sale of the company's entire business book to Provident Insurance Corporation.
The credit rating agency placed Co-op Insurance NZ's insurer financial strength rating of 'BBB-' (Good) on rating watch negative, from a previous rating watch evolving, Fitch Ratings Singapore analysts Siew Wai Wan and Christopher Han said in a statement.
"The rating action reflects the uncertainty surrounding the proposed sale of Co-op Insurance NZ's entire business book to Provident Insurance Corporation, which is pending the regulatory approval of the Reserve Bank of New Zealand, as well as the risk of weakening business franchise and generation from its credit union owner, the New Zealand Association of Credit Unions," Fitch said in the statement.
The rating watch negative will be resolved when Fitch has sufficient information regarding the outcome of the proposed transaction and any changes in Co-op Insurance NZ's strategic direction to evaluate the full credit impact on the company, Fitch said.
A negative rating action could occur if there is sustained weakness in the business franchise and generation, which could impact Co-op Insurance NZ's profitability and capital levels, according to Fitch.
Co-op Insurance NZ, which posted a net loss of $0.34 million for its fiscal 2017 year due largely to an increase in frequency of claims and higher claims payment for its motor portfolio, has estimated a net profit of $570,000 for its fiscal 2018 year, Fitch noted.
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