Fitch has affirmed the 'A-' Issuer Default Rating (IDR) of Ageas Insurance International NV, the immediate holding company of Ageas. Ultimate holding company Ageas SA/NV has also had its long-term IDR affirmed at 'BBB+'
The other Ageas operating companies, AG Insurance, Ageas Insurance Co (Asia) Ltd and Occidental-Companhia Portuguesa de Seguros de Vida, have had their ratings affirmed.
All outlooks are Stable with the exceptions of Ocidental Seguros, Medis and Ocidental Vida, which have an assigned outlook of Positive.
Fitch said that the upgrade of the Portuguese businesses reflected their increased importance to the Ageas business as a whole, following the full-ownership acquisition by Ageas in June this year from Banco Comercial Portugues from €122.5m (Reactionsnet.com, May 26 2014). At the time Ageas chief executive Bart de Smet said that Portugal was "a market that we know well and is characterised by still low penetration rates. With our track record of very low combined ratios, we believe this market represents a promising opportunity for our group".
Fitch also noted that Ocidental Vida, Ocidental Seguros and Medis had a strong level of capital, "robust profitability", and a strong business position within the Portuguese market. However, the ratings of the Portuguese companies – which since the emergence of Ageas from the ashes of Fortis have become one of three core businesses of the new operation – are constrained by Portugal's sovereign rating and the related asset risk on the insurers' balance sheets.
Fitch also noted that Ageas' financial leverage fell to 21% by the end of last year, having been in the 25% to 30% range for several years. However, Fitch also noted the challenging underwriting conditions in Belgium and in the UK, which were putting pressure on the group's earnings. Low bond yields were limiting investment income. Fitch expects both these profit-limiting conditions to continue in the short term. However, the business in Asia and Turkey is more profitable.
Finally, Fitch warned that Ageas SA/NV, the ultimate holding company and the one which faces an potential litigation relating to the Fortis days, "continues to face litigation risk from former Fortis shareholders in Belgium and the Netherlands". That is the reason Fitch puts Ageas SA/NV at two notches below AG Insurance, instead of the standard one not lower being applied to the holding company.