S&P cautious on Calliden/AU deal
Standard & Poor’s (S&P) has put the Australian Unity general insurance operation’s BBB rating on CreditWatch with negative implications following the decision to sell it to Calliden.
The action “reflects uncertainty around the financial strength of the prospective parent Calliden – given it is unrated – and the likely loss of explicit support from Australian Unity,” the ratings agency said on Friday.
“S&P has always acknowledged that [Australian Unity’s general insurance business] was not a core subsidiary of the group and rated the non-life business a notch below that of the health insurance business.”
The ratings agency acknowledges that Calliden is listed on the Australian Stock Exchange listing and has a capital base of $78.6 million. “However, Calliden has a short operating history, having written new business only from May 2005, and generated losses in 2006.”
Acknowledging that the acquisition will provide scale to Australian Unity’s non-life business and that much of the niche business appears a complementary fit with Calliden’s, S&P said some ongoing interaction with the Australian Unity group is expected through the purchase of a 13% share in Calliden.
The CreditWatch will be resolved on finalisation of the acquisition – scheduled for the end of this month – and a further review of the business, financial, and strategic impact of Australian Unity’s new parentage.
The action “reflects uncertainty around the financial strength of the prospective parent Calliden – given it is unrated – and the likely loss of explicit support from Australian Unity,” the ratings agency said on Friday.
“S&P has always acknowledged that [Australian Unity’s general insurance business] was not a core subsidiary of the group and rated the non-life business a notch below that of the health insurance business.”
The ratings agency acknowledges that Calliden is listed on the Australian Stock Exchange listing and has a capital base of $78.6 million. “However, Calliden has a short operating history, having written new business only from May 2005, and generated losses in 2006.”
Acknowledging that the acquisition will provide scale to Australian Unity’s non-life business and that much of the niche business appears a complementary fit with Calliden’s, S&P said some ongoing interaction with the Australian Unity group is expected through the purchase of a 13% share in Calliden.
The CreditWatch will be resolved on finalisation of the acquisition – scheduled for the end of this month – and a further review of the business, financial, and strategic impact of Australian Unity’s new parentage.