Fitch Ratings announced October 4 that it is removing mid-sized insurer, ivari, from rating watch negative or RWN.
“The rating action follows the completion of the previously announced sale of ivari from Wilton Re Ltd. to Sagicor Financial Company Ltd. The affirmation with a stable outlook reflects Fitch’s view that ivari’s credit quality will be maintained under its new owner, with a stronger balance sheet partially offset by a weaker parent,” the ratings agency writes in a statement about the rating action.
Going forward following the acquisition, ivari is expected to operate as a standalone entity with minimal integration with its new parent. “ivari is rated higher than its new parent based on Fitch's view that it is sufficiently insulated from any potential weakness. ivari will have dividend paying capacity to support parent company objectives, though it is expected to maintain a higher regulatory target capital level compared with under prior ownership,” they add.
Profitability, meanwhile, is expected to exhibit more stability under IFRS 17, “though return metrics will trail larger and higher rated Canadian peers.”
Currently with an insurer financial strength rating of A-, the ratings agency further says that an upgrade for ivari is unlikely absent an upgrade in Sagicor’s rating, coupled with improvement in the company’s standalone credit quality. At the same time, should the company’s life insurance adequacy test (LICAT) ratio fall below 110 per cent – it currently sits at 123 per cent – or if Sagicor’s own ratings decline, this could in turn lead to a downgrade in ivari’s ratings.