Reflecting Ireland’s economic
woes, the country’s largest life insurer Irish Life Assurance’s
insurer financial strength rating has been downgraded by rating
agency Fitch Ratings from A- to BBB+ and its long-term issuer
default rating from BBB+ to BBB. BBB is the lowest investment grade
rating.
In its review, Fitch noted:
“The downgrade of Irish Life’s ratings and negative outlook reflect
the deterioration in the macro-economic environment in
Ireland.
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“The impact of the Irish
government’s austerity package, high unemployment and reduced
consumer confidence could trigger higher policyholder lapse rates
and lower sales volumes, threatening Irish Life’s
profitability.
“The company is also exposed
to increased investment risk as it has shareholder exposure to
Irish sovereign debt and other Irish investments.”
Irish Life is a unit of Irish
Life & Permanent (ILP) which has as its other major unit Irish
bank Permanent tsb. ILP was formed in 1999 following the merger of
Irish Life and Irish Permanent.
In that merger also lies part
of the reason for Irish Life’s downgrade by Fitch. Specifically, in
November 2010 the Irish Central Bank instructed ILP to raise some
€100m ($130m) in new capital, an amount which Irish Life will
provide to ILP through a securitisation.
In 2009, Irish Life generated gross premium income of
€2.54bn to give it a market share of 27.2%, well ahead of its
closest rival, Bank of Ireland Life, with an 18% market
share.
