Delta Lloyd Remains on CreditWatch Negative, Pending EGM & Rights Issue: S&P

March 14, 2016

Standard & Poor’s Ratings Services said it is maintaining on CreditWatch with negative implications its “A-” long-term counterparty credit and insurer financial strength ratings on Delta Lloyd Levensverzekering N.V. and Delta Lloyd Schadeverzekering N.V., the core operating companies of the Delta Lloyd N.V. group (DL).

At the same time, S&P maintained its CreditWatch negative on DL’s “BBB” counterparty credit rating on DL, its “BBB+” rating on Delta Lloyd Treasury B.V., and all related debt ratings.

S&P said it is maintaining its CreditWatch because of continuing uncertainty over whether DL will successfully raise new capital through its proposed rights issue. (On Feb. 24, 2016, DL revised downward its planned rights issue to €650 million from €1 billion).

The ratings agency said it included in its assessment DL’s proposed additional capital management actions announced in February, which also are designed to enhance capital adequacy. These include selling a 30.5 percent stake in private bank Van Lanschot, carrying out asset liability management actions, and de-risking DL’s investment portfolio, S&P said.

“In our opinion, these capital management actions will help to improve DL’s capital adequacy, measured by our capital model,” S&P added.

“The actions alone, however, would not be sufficient to maintain our capital and earnings assessment absent the planned rights issue,” the ratings agency said.

It explained that the capital management actions carry an execution risk, and if only partially successful would make Delta Lloyd’s capital adequacy “even more dependent on the rights issue and the actual amount raised.”

S&P expects to resolve the CreditWatch placement upon completion of the rights issue planned in March 2016 and upon the outcome of the insurer’s extraordinary general meeting taking place on March 16. (The approval of the
rights issue will be discussed at the EGM.)

“Depending on the outcome of this, we could either affirm the ratings on the Delta Lloyd operating companies or lower them by up to two notches due to weaker capital and earnings and the strain on financial flexibility.”

Delta Lloyd’s Recent Rating Actions
  • On Aug. 14, 2015, S&P placed Delta Lloyd’s ratings on CreditWatch with negative implications after the group reported a material, unexpected net loss in the first half of the year.
  • On Dec. 14, 2015, S&P lowered its ratings on DL’s core operating subsidiaries to “A-” from “A” after its review of proposed capital and strategic management actions (including the successful execution of a €1 billion rights issue) concluded that their financial risk profile had weakened compared to our previous assessment.

Source: Standard & Poor’s

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