S&P Places Fortis Insurance Units on CreditWatch

October 7, 2008

Standard & Poor’s Ratings Services has placed certain of its ratings on the insurance entities of Fortis group on CreditWatch as follows:
–With positive implications, the ‘A’ long-term counterparty credit and financial strength ratings on Fortis Insurance Belgium (FIB);
–With developing implications, the ‘A’ long-term counterparty credit and financial strength ratings on Dutch entities Fortis ASR Levensverzekering N.V. and Fortis ASR Schadeverzekering N.V.; and
–With developing implications, the ‘A-‘ long-term counterparty credit and financial strength ratings on the Dutch company Fortis Corporate Insurance N.V. (FCI).

The CreditWatch placements follow Fortis’ announcement on Friday that it sold all of its Dutch entities–including Fortis ASR Levensverzekering N.V., Fortis ASR Schadeverzekering N.V., and FCI–to the Dutch government. It also follows yesterday’s announcement that French bancassurance group BNP Paribas will acquire Fortis’ Belgian activities (See IJ web site – https://www.insurancejournal.com/news/international/2008/10/06/94341.htm).

“The positive implications for FIB reflect its takeover by a bancassurance group that is likely to ensure the continuity of the company’s strategy and to provide sound support,” explained credit analyst Lotfi Elbarhdadi.

S&P also noted that “BNP Paribas Assurance has a business model that is similar to and is likely to support FIB’s. BNP Paribas distributes through its proprietary banking outlets and has a long experience in dealing with nonproprietary networks, including banks, independent financial advisers, and brokers. FIB represents sound diversification for BNP Paribas Assurance in a market where it was not significantly present.”

Elbarhdadi went on to explain that the “developing implications for the Dutch entities reflect uncertainties about the conditions of their disposal, the medium-term prospects regarding their ultimate ownership, and the potential impact on their competitive position.”

S&P added that it expects the “Dutch government to sell these companies in the medium term and to support them in the interim. It is likely that the ratings on these entities will move independently of each other, as their strategic orientations become clearer under their new and ultimate ownership. If we ultimately lower the ratings, this is likely to be by one to two notches depending on the entity concerned.

“To resolve the CreditWatch placement on FIB, in the coming weeks Standard & Poor’s will reassess FIB’s stand-alone features and try to obtain a view of its future structure under the BNP Paribas ownership. If as a result of our review our concerns are alleviated about the continuity of FIB’s business model and sound support for the insurer by the new owner, we may raise the ratings by one or two notches.”

Source: Standard & Poor’s – www.standardandpoors.com

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