ING Canada’s ratings affirmed, ING Groep’s downgraded: Moody’s

**CORRECTION**ING Canada’s subsidiaries were not downgraded as initially reported. Canadian Underwriter regrets and apologizes for this error.

Moody’s Investors Service has affirmed ING Canada Inc.’s ratings and those of its operating subsidiaries, following the downgrade of ING Groep to Aa3 for senior debt from Aa2.
The outlook for ING Canada remains stable.
The rating affirmation was based on the underlying strength of the company’s insurance subsidiaries, Moody’s reports.
“ING Canada has an excellent market position in the highly fragmented Canadian P&C industry, an underwriting and risk management discipline which produces good operating results year-over-year, strong reserve adequacy with consistently favorable prior-year development, and excellent financial flexibility,” Moody’s reports. “Partially offsetting these strengths are a narrow business model that has a significant weighting towards Canadian personal auto insurance, relatively weak capitalization, a sizable exposure to preferred shares issued by Canadian financial institutions, and a reliance on third party brokers for distribution.”
ING Groep holds a 70% stake in the Canadian insurer, but the ratings and outlook for ING Canada remained the same because its ratings are based on its standalone strength and do not incorporate any support from the majority owner, Moody’s notes.
ING Canada’s ratings “could be upgraded if it broadened its business model, shifting weight away from personal auto; built up proprietary distribution such that it produced 50% of direct premiums written; lowered high risk assets to invested assets to below 30% (the bulk of ING Canada’s high risk assets are preferred shares of highly-rated financial institutions); raised its regulatory minimum capital test (MCT) ratio such that it approaches the Canadian average of 235%; and/or delivered consistently positive operating earnings (excluding realized gains), with return on equity (ROE) above 15% for a sustained period,” according to Moody’s.