S&P Assigns ‘A’ Rating to Teleco

Standard & Poor’s Ratings Services announced that it has assigned its “A” insurer financial strength and counterparty credit ratings to Teleco Insurance Ltd. (TIL), a Bermuda-based captive insurer of Telecom Southern Cross Ltd. (TSCL), and ultimately, of Telecom Corp. of New Zealand Ltd. (TCNZ; A/Stable/A-1).

“TIL is a recently established general insurer, which will write new business from Jan. 1, 2005, and will assume, by way of novation, certain insurance and reinsurance business of related New Zealand-based captive Teleco Insurance (NZ) Ltd.,” said S&P. “Lines of business will include insurance for material damage/business interruption, public liability, crime, and errors and omissions risks of the parent telecommunications company TCNZ and its wholly owned subsidiaries.”

S&P said the outlook for the rating is stable. S&P credit analyst Michael Vine noted: “The ‘A’ rating on TIL is equalized with that of the parent TCNZ under Standard & Poor’s methodology for captive insurers. The business of TIL relates exclusively to TCNZ group risk (not third party), and TIL’s strategy is aligned with the parent’s risk financing strategy, allowing the ratings to be equalized.”

“In addition, the financial structure of TIL’s investment profile, capitalization, and reinsurance coverage is sound. TIL is capitalized with NZ$75.2 million [U.S. $53.92 million] ordinary shares and NZ$75 million [U.S.$53.78 million] redeemable preference shares to immediate parent TSCL, such that paid-up capital of TIL is now NZ$150.2 million [U.S.$107 million],” said the bulletin. “Capitalization is therefore strong for the risks of the captive insurer, and represents a suitable multiple of TIL’s risk retention before reinsurance,” Vine added.