S&P’s Assigns ‘A-’ Rating to AA Insurance

Standard & Poor’s has assigned its ‘A-’ insurer financial strength rating on New Zealand-based AA Insurance Ltd. (AAIL). The rating reflects the company’s core status in the Royal & Sun Alliance Insurance (New Zealand) Ltd. group and demonstrated strong links and highly integrated operations with its parent company. The outlook on AAIL is developing.

AAIL’s stand-alone strength reflects its good market position and brand, along with the strength of its 68 percent ownership by RSAINZ and 32 percent ownership by New Zealand Automobile Association (NZAA; not rated).

Offsetting these strengths are the historically poor, but improving, earnings performance of its predecessor AA-GIO Insurance Ltd. (BBB+/Stable/–), and a strong competitive environment in the New Zealand general insurance market.

“We expect that AAIL’s stand-alone business profile will be strengthened, as the company becomes a consistently profitable and growing business while leveraging off the benefits provided by both its owners, RSAINZ and NZAA,” Peter Sikora, director, Financial Services Ratings, commented. “Standard & Poor’s does not expect any dilution in RSAINZ’s majority shareholding, despite some uncertainty in the outcome of the upcoming Royal & Sun Alliance Australasia group’s initial public offer.”