S&P set Austria-based UNIQA Insurance Group CreditWatch to negative from developing on the 'A-' long-term issuer credit and financial strength ratings. The agency also revised to negative the CreditWatch on 'BBB' ratings on the group's junior subordinated debt.
"The CreditWatch revision follows UNIQA's announcement on Feb. 19, 2020, that further examinations of the potential merger between the group entities has led the company to revise the previously announced plans. Under the new proposal, UNIQA Insurance Group would continue to be the holding company of the group, while UNIQA Austria would remain the main operating company of the group and merge with UNIQA International," S&P Global Ratings mentioned.
The revised merger plan led S&P to believe that UNIQA Insurance Group (UIG), despite continuing to act as the group holding company, would gradually become non-operational. S&P explains that UIG would no longer underwrite reinsurance activities and that UIG would return its insurance license and may act only as a financial holding company.
"The negative implications of the CreditWatch indicate that we could downgrade UIG if the company receives all the necessary regulatory approvals of its revised merger plan and proceeds to transition into the amended structure. We expect to resolve the CreditWatch once we receive confirmation that shareholders have approved the newly presented structure," S&P further explained.
S&P's credit watch negative designation also reflects the current credit watch negative the rating agency has on the core operating entities of UNIQA following the announcement of the acquisition of AXA's central and eastern European operations.
"We acknowledge the lingering uncertainty regarding the potentially material adverse and sustained impact on UNIQA's financial risk profile from the group's plans to acquire AXA CEE's operations. (...) we will continue to monitor developments on UNIQA's prospective capital and earnings position and funding structure, unless details have already materialized," S&P added.
S&P expects to receive clarity on the anticipated merger after UNIQA's general assembly on May 25, 2020.