S&P: Fortis Insurance on Credit Watch, Negative; Holding Co./’Developing’

February 11, 2009

Standard & Poor’s Ratings Services has revised its implications to negative from developing on the CreditWatch placement of its ‘A’ long-term counterparty credit and insurer financial strength ratings on Fortis Insurance Belgium (FIB).

“The negative implications reflect increasing uncertainties about the ultimate organization of Fortis group and its resulting creditworthiness, and our belief, as we review FIB’s stand-alone credit profile, that the possibility for an upgrade is remote,” explained credit analyst Lotfi Elbarhdadi.

In addition S&P has maintained its “CreditWatch with developing implications” for its ‘BBB-‘ long-term counterparty credit ratings and ‘A-3’ short-term counterparty credit ratings on Fortis SA/NV and Fortis N.V., the group’s two holding companies. “The developing implications for the holding companies indicate the remaining upside potential for the long-term rating, assuming they head a strongly rated insurance-led group,” said S&P.

However, the rating agency also indicated that they “reflect the possibility of a substantial downgrade arising from the uncertainties around the ultimate organization, cash position, and legal risk that may emerge from the Fortis shareholder meeting on Feb. 11, depending upon the outcome of the vote. Also factored in is the potential resulting pressure on the group’s financial profile, including liquidity, from other noninsurance assets and liabilities of the holding companies.

“We expect to resolve or update the CreditWatch on FIB in the coming weeks. Our decision will depend on the results of our stand-alone review of FIB and our view of the effect of the outcome of the shareholder meeting on the group’s overall creditworthiness. Our decision will also depend on whether the Belgian government would provide support if the shareholders reject the proposed agreement. If we come to negative conclusions in these areas, we could downgrade FIB by one or two notches.

“Upon resolving or updating the CreditWatch on FIB, we expect to follow with an update on the holding companies. We expect the upside potential for the ratings on the holding companies to be limited to one or two notches. But we believe the downside potential to be several notches because of the above mentioned uncertainties and heightened risk from the noninsurance assets and liabilities, including in case the agreement subject to vote is rejected by the shareholders.”

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

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