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S and P raise Irish Life rating to A-

Friday, February 21 12:17:31

Global ratings agency, Standard and Poor's, today raised its rating for Irish Life Assurance to A-, one notch above the sovereign rating.

S and P said it believes the company "is likely to continue to have a strong competitive position, and very strong capital and earnings".

"We consider ILA to have a material exposure to Irish assets. ILA held around E555 million of Irish debt and around E45 million of Irish property on Dec. 31, 2013, while its total regulatory capital was E782 million pre-dividend. We have applied our hypothetical foreign currency sovereign default stress test to ILA's balance sheet, including haircuts on all Ireland-based assets, including sovereign bonds, local bank and corporate bonds, real estate, deposits, and equities. We then compared the euro amount of hypothetical losses with the regulatory solvency capital of the insurer (capital stress) to which we added one year of pre-tax, post-haircut earnings. We also applied a liquidity stress under our criteria that used the asset haircuts above," it said.

"Furthermore, the E555 million includes E184 million of bonds backing Irish sovereign annuities, under which the full amount of any default would be passed on to the customer, assuming that the default scenario proceeds as expected."

"We estimate that the haircuts associated with the capital test would not deplete ILA's regulatory solvency capital. This indicates, according to our criteria, that ILA would not default on its insurance liabilities under the scenario. In addition, we consider that the liquidity test would result in a liquidity ratio of more than 100pc. ILA therefore passes our sovereign default stress test," S and P added.

Commenting, Irish Life Group Chief Executive, Bill Kyle said that the move was a positive development for the company. "We are particularly encouraged that S and P has pointed to Irish Life's very strong financial risk profile, capital and earnings and strong risk management controls while also noting that our liquidity is exceptional."

Based on its expectations that Irish Life is likely to continue to have a leading competitive position in Ireland, while maintaining its very strong capital and earnings, S and P has given a stable outlook for the rating.