Argentina upgrades keep on coming

By
Tuesday, December 5, 2017

Moody's has upgraded 19 Argentine insurers and reciprocal guarantors, as well as six provinces and four municipalities.

The news comes after the rating agency upgraded Argentina's local and foreign currency issuer and senior unsecured ratings to 'B2' from 'B3' and assigned them a stable outlook.

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S&P has also made an upward revision to the country's debt rating, to 'B+' from 'B', and Fitch has raised the outlook on its rating to positive from stable as the country's economy gathers strength.

The upgrade of insurers and guarantors "reflects a combination of the beneficial impact of the sovereign upgrade on multiple aspects of their financial profiles, including asset quality, capital adequacy and financial flexibility, as well as their meaningful sensitivity to sovereign and systemic risk," Moody's said in a statement.

"Given the entities' high sovereign investment exposure and the close linkages between their credit profiles and the sovereign, the country's sovereign rating upgrade benefitted the companies' financial fundamentals," it added.

For January-June, the country's insurers reported a profit of 22.1bn pesos (US$1.28bn), up 10.56% year-on-year. The market is dominated by local players and nearly 80% of premiums correspond to the vehicle, worker compensation and life insurance segments.

Among those upgraded are the country's No.2 insurer by market share, local player Caja de Seguros, and the local units of global players Chubb, QBE, Allianz and BBVA. See the full list here.

Moody's also upgraded six provinces and four municipalities and changed their outlooks to stable from positive.

"The ratings upgrade of the provinces of Buenos Aires, Chaco, Córdoba, Formosa, Misiones, Río Negro, the City of Buenos Aires, the municipality of Córdoba, the municipality of Río Cuarto and the municipality of Río Grande, follows a similar rating action on Argentina's sovereign bonds ratings and reflects the very close economic and financial linkages that exist between Argentina's government and Argentine sub-sovereigns," the agency said.

The government has struck a deal with 22 of the 23 country's provinces under which they agree to reduce local taxes and limit spending and halt litigation against the federal government over undelivered funding. In return the provinces will receive the proceeds of an 80bn-peso (US$4.6bn) federal government bond.