S&P Assigns ‘B’ Rating to N.Z.’s Simply Insurance

April 1, 2005

Standard & Poor’s Ratings Services announced that it has assigned its ‘B’ rating to Simply Insurance New Zealand Ltd. with a stable outlook.

“The rating reflects the sensitivities of a start-up operation with no operating history, a small and concentrated business position, and a small initial capital balance of NZ$2 million [U.S. $1.416 million],” stated S&P credit analyst Michael Vine.

S&P indicated: “These sensitivities are offset to a degree by the financial characteristics of the larger and more established sister company Pacific Retail Finance Ltd. (PRF; not rated) and related group company Pacific Retail Services Ltd. (PRS; not rated), from which Simply Insurance will largely derive its business. Simply Insurance is a start-up captive insurer providing consumer credit insurance to personal loans originated by PRS, and ultimately held and funded by PRF.

“A small part of its business will also be derived from hire-purchase contracts originated by merchants and ultimately acquired by PRS. For these third-party contracts, Simply Insurance will provide consumer credit insurance and property/chattel cover.

“The ‘B’ rating denotes weak financial security characteristics, although the obligor currently has the capacity to meet its financial commitment on its obligations,” the bulletin noted. “The rating on Simply Insurance also takes into account the financial strength characteristics of the larger and more established PRF and PRS, given their related ownership, management, and operations. These entities are ultimately owned by New Zealand Stock Exchange-listed Pacific Retail Group Ltd.,” Vine continued.

S&P said, however, that Simply Insurance “is not explicitly supported by the group, although it has been capitalized from group resources. PRF has adequate risk-based capitalization, good credit loss record over a short time frame, solid earnings, and reasonable geographic diversification. Moderating features are the company’s limited market position and profile in a highly contested market, and concentrated funding profile.

“The stable outlook reflects Standard & Poor’s expectation of profitable operating performance from start-up in April 2005 and ongoing linkages with PRF and PRS.”

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