Fitch ratings has placed the 'AA' Insurer Financial Strength ratings of Insurance Australia Group (IAG) underwriter, NRMA Insurance, on Watch Negative.
Fitch ratings have placed the 'AA' Insurer Financial Strength ratings of Insurance Australia Group (IAG) underwriter, NRMA Insurance, on Watch Negative.
The decision to downgrade IAG was taken in light of IAG's imminent takeover of Aviva's Australasian insurance arm for £638m. Fitch expressed concerns over the funding of the acquisition.
A spokesman said: "Despite clear business benefits, the acquisition will also materially impinge on IAG's financial profile. It will result in a decline in IAG's capital position and a significant increase in gearing."
However the ratings agency reacted positively to the acquisition, saying that it believed "IAG will benefit fro greater geographic diversification".
Fitch sought to reassure investors by promising to meet with IAG to assess the impact of the deal on the group's financial strength. A spokesman added: "Fitch often uses Rating Watch Negative in cases of events that could have a meaningful impact."
