Moody's goes negative on 19 Argentine insurers and financial guarantors' outlook

Rating agency Moody's has revised the outlook of 13 insurers and six financial guarantors in Argentina to negative from stable due to concerns over their asset quality, profitability and capital adequacy, following the change in Argentine's sovereign rating.

Moody's Latin America Agente de Calificación de Riesgo SA has also affirmed the global local currency (GLC) and national scale (NS) insurance financial strength (IFS) ratings of the 19 entities. The outlook of their corresponding NS IFS ratings remains stable.

This portfolio-wide rating action on the Argentine insurers follows Moody's Investors Service's outlook change to negative from stable on Argentina's B2 sovereign bond ratings.

Moody's said that the negative outlook on the 19 entities' GLC IFS ratings considers that a potential downgrade of the Argentine sovereign rating would exert downward pressure on the companies' credit profiles - and consequently rating downgrades - reflecting Moody's assessment of a high correlation between their credit profiles and that of the sovereign.

Such correlation takes into account the degree to which the companies' businesses depend on the domestic macroeconomic and financial environment - exacerbated by their lack of cross border diversification -; and their direct and indirect exposures to the sovereign, which weighs on their asset quality, capital adequacy and financial flexibility profiles.

The agency noted that all the companies' NS IFS rating outlooks remain stable because their creditworthiness relative to other Argentine issuers will likely remain unchanged in the event of a sovereign bond rating downgrade.

The 13 insurers whose GLC/NSR IFS ratings have been affirmed and outlooks of their GLC IFS ratings were changed to negative from stable, include Allianz Argentina Compania de Seguros S.A. (Ba2/Aaa.ar), BBVA Consolidar Seguros (Ba2/Aaa.ar), Caja de Seguros S.A. (Ba3/Aaa.ar), Chubb Seguros Argentina S.A. (Ba2/Aaa.ar), Fianzas y Credito S.A. Cia. de Seguros (B2/A2.ar), La Segunda ART (B1/Aa2.ar), La Segunda Compania de Personas S.A. (B1/Aa2.ar), La Segunda Coop. Ltda Seguros (B1/Aa2.ar), Origenes Seguros S.A. (B1/Aa3.ar), Provincia Seguros (B2/A1.ar), QBE Seguros La Buenos Aires S.A. (Ba2/Aaa.ar), San Cristóbal Seguros Generales (B1/Aa2.ar), Seguros Sura S.A. Argentina (Ba3/Aa1.ar).

The six financial guarantors include Affidavit S.G.R. (B2/A2.ar), Aval Rural S.G.R. (B1/Aa3.ar), Fondo de Garantías del Chaco (FOGACH) (B2/A3.ar), Garantías BIND SGR (B1/Aa3.ar), Integra Pymes S.G.R. (B2/A3.ar), Vínculos SGR (B2/A3.ar).

Moody's said the factors that could lead to a further rating downgrade for the 13 insurers and 6 financial guarantors with negative outlooks are: 1. a downgrade of the Argentine sovereign bond rating, 2. deterioration in the country's operating environment, and 3. deterioration in companies' asset quality, profitability or in their capital adequacy.

Given the negative outlook on the companies' GLC IFS ratings, a rating upgrade is unlikely, it said.

However, the following factors may prompt an outlook change back to stable: 1. a change of Argentina's sovereign outlook back to stable from negative, 2. an improvement in the country's insurance operating environment, and 3. an improvement in companies' asset quality, profitability or in their capital adequacy.

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