Standard & Poor's Rating Services has lowered the rating of Tryggingamiðstöðin
hf. and its subsidiary, Nemi Forsikring ASA in Norway, from BBB to BBB-. The
companies have been on CreditWatch since June 6. The outlook on both entities
is stable
This action by Standard and Poor's reflects its concerns over the increasing
levels of debt leverage in FL Group, the parent company of Tryggingamiðstöðin
hf. In the announcement from Standard & Poor's it is stated; that following
discussions with the management of FL Group, S&P has concluded that there is a
potential threat to capitalization of TM even though there are regulatory,
governance and other mechanism in place to limit that. It is however Standard &
Poor's view that standalone credit quality of both TM and Nemi remains
unchanged.
TM's Board of Directors regrets this result and points out that the capital
position of TM and Nemi remains strong and the companies have full potential to
continue servicing their customers in the future.
For further information contact Óskar B. Hauksson, VP of Finance and
Operations, tel: +354 5152000.
The announcement from Standard & Poor's:
Insurers Tryggingamidstödin hf. And Subsidiary NEMI Forsikring ASA Downgraded
To 'BBB-'
Primary Credit Analyst: Peter McClean, London, (44) 20-7176-7075;
peter_mcclean@standardandpoors.com
Secondary Credit Analyst: Rowena Potter, London, (44) 20-7176-7070;
rowena_potter@standardandpoors.com
Additional Contact: Insurance Ratings Europe;
InsuranceInteractive_Europe@standardandpoors. com
Rationale
On June 26, 2008, Standard & Poor's Ratings Services lowered to 'BBB-' from
'BBB' its long-term counterparty credit and insurer financial strength ratings
on Iceland-based insurer Tryggingamidstödin hf. (TM) and its subsidiary,
Norway-based non-life insurer NEMI Forsikring ASA. At the same time, the
ratings were removed from CreditWatch, where they were placed with negative
implications on June 6, 2008. The outlook on both entities is stable.
The rating actions reflect our concerns over the levels of debt leverage in
the parent company, Iceland-based investment holding company FL Group (not
rated). These concerns relate particularly to the potential threat to the
capitalization of TM and NEMI derived from the uncertainty regarding FL's
ability to service its debt obligations. In our view, this diminishes TM's and
NEMI's financial flexibility.
Following discussions with FL Group's management, Standard & Poor's has
received further clarification regarding FL's intentions toward its investment
in TM and NEMI, and regarding FL's ability to draw upon the capital resources
of those entities. As a result of these discussions, we have concluded that
there is sufficient potential threat to capitalization to justify a downgrade.
However, we also believe that there are regulatory, governance, and other
mechanisms in place that will limit the extent to which FL is able to access
TM's capital, and that consequently the downgrade should be limited to one
notch. Standard & Poor's view of the stand-alone credit quality of both TM and
NEMI remains unchanged.
Outlook
The stable outlook reflects Standard & Poor's expectation that capitalization
will be maintained at a level that supports the ratings on both TM and NEMI to
offset our continuing concerns regarding FL Group's debt leverage. In this
respect, we will continue to monitor the parent's actions to reduce leverage,
as well as its dividend flows from TM and NEMI. An upgrade is regarded as
unlikely in the medium term, based on information currently available.
Conversely, any significant unexpected deterioration in the TM group's
capitalization may lead to a downgrade.
Ratings List
Downgraded; CreditWatch/Outlook Action
To From
Tryggingamidstodin hf.
NEMI Forsikring ASA
Counterparty Credit Rating
Local Currency BBB-/Stable/-- BBB/Watch Neg/--
Financial Strength Rating
Local Currency BBB-/Stable/-- BBB/Watch Neg/--