A.M. Best Assigns Debt Rating to Industrial Alliance Insurance and Financial Services Inc.’s Newly Issued Subordinated Debentures
OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a debt rating of “a” to the recently issued CAD 250 million 2.80% subordinated debentures due May 16, 2024 of Industrial Alliance Insurance and Financial Services Inc. (IA) (Quebec, Canada) [TSX: IAG]. The outlook assigned is stable.
The stable outlook is consistent with the outlook for all the other existing ratings of IA and its core operating insurance subsidiaries. (For further details, please see A.M. Best’s press release dated February 27, 2014.)
The proceeds from the debt offering will be added to IA’s capital base and be utilized for general corporate purposes, including the redemption of CAD 150 million of subordinated debentures due 2019, scheduled to occur on June 30, 2014. A.M. Best notes that IA’s overall financial leverage is expected to remain below 30%, while interest coverage is expected to remain above five times. Both measures are within A.M. Best’s guidelines for IA’s current rating level.
The rating recognizes IA’s strong capital growth, consistent profitability, reduced exposure to interest-sensitive businesses and the growing product diversity in its businesses. For the first quarter ending March 31, 2014, IA again reported solid operating earnings while maintaining adequate risk-adjusted capital ratios. Premium grew during the first quarter and was led by strong group savings and retirement sales as well as property/casualty product sales. While capitalization remains strong, the company’s solvency ratio decreased during the period due to the decrease in long-term interest rates. A.M. Best will continue to monitor the impact of the current macroeconomic environment, including interest rate movements on IA’s earnings and risk-adjusted capital.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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