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|
Sovereigns Ratings List
Entity Domestic Rating Foreign Rating T&C Assessment
New Zealand AAA AA+ AAA
Ratings Across Various Sectors In New Zealand Are Unaffected By Government's Housing-Support Package
Publication date: 24-Jun-2011 14:53:20 AEST
--------------------------------------------------------------------------------
View Analyst Contact Information
MELBOURNE (Standard & Poor's) June 24, 2011--Standard & Poor's Ratings
Services said today that the New Zealand government's announced support
package for residential home owners who have been most affected by the
Christchurch earthquakes has broadly no rating impact across the banking,
insurance, infrastructure, and government sectors. This is because the
estimated cost of between NZ$485 million and NZ$635 million to the New Zealand
government to purchase the circa 5,000 properties currently in the residential
red zone appears to be met from the government's already fully provisioned
NZ$5.5 billion Canterbury Earthquake Recovery Fund.
For financial institutions, we view the package as being supportive to
affected borrowers, as it mitigates the adverse financial impact of
property-value decline and the more limited prospects that badly affected
Christchurch home owners faced in recouping value from their properties (see
below).
For insurers, the result is close to neutral, with the government assuming the
existing ability of policyholders to claim on property insurance. However,
uncertainty remains around the ultimate cost to the insurance sector, given
continued seismic activity, a lack of access to and capacity for claims
assessment, and the division of exposures between insurers, reinsurers, and
the Earthquake Commission (see below).
With this fluidity in exposure and ongoing incidence of natural disasters,
Standard & Poor's continues to actively monitor all sectors in the region.
BACKGROUND
On June 23, 2011, the New Zealand government announced a package for domestic
property holders in the most earthquake-affected areas of greater
Christchurch. The government has, with the assistance of geotechnical
engineers, divided the Christchurch area into four residential zones: red,
orange, green, and white. People who owned property with insurance in the
residential red zones (the most affected by the Christchurch earthquakes,
totalling about 5,000 properties) on Sept. 3, 2010, have been offered two
options: 1) the Crown makes an offer of purchase for the entire property at
current rating value (less any built property insurance payments already
made), and assumes all the insurance claims other than contents; or 2) the
Crown makes an offer of purchase for the land only, and homeowners can
continue to deal with their own insurer about their homes.
FINANCIAL INSTITUTIONS
We expect that the announced support package for the red zone qualifiers will,
on balance, mitigate the financial impact of this natural disaster on
financial institutions, with lending exposures to borrowers covered by the
assistance package. Critical to the support package is news that the offers
will be based on council rate valuations set in 2007. The downward pressure on
property prices in the past few years suggests that people taking up the
government's offer should be reasonably placed to settle borrowing obligations
that are tied to the purchase of these properties.
This said, Standard & Poor's expects that credit losses could, nonetheless, be
realized by some borrowers even if they are covered by the support package.
New Zealand's financial institutions continue to be supportive of affected
borrowers with respect to repayment holidays and subsidized funding with
regard to affected homeowners wanting to relocate. This support is, however,
not expected to materially detract from the financial performance of
individual financial institutions.
The Christchurch earthquake itself has not, to this point, resulted in any
specific rating action on any rated financial intuitions in New Zealand.
Standard & Poor's continues to monitor financial institutions with lending
exposures in the Christchurch area, particularly those with exposures in areas
not covered by the announced package.
INSURANCE
The announcement will provide some comfort to policy holders, with many able
to realize value in their property insurance earlier. This will not likely
pose any greater liability or exposure on the insurance sector, with the
government effectively assuming the existing claiming rights of policyholders.
We would, however, expect that some mediation and negotiation is available,
which could possibly reduce the ultimate claims and expense cost for insurers.
The environment for the primary insurance sector and the New Zealand
Earthquake Commission (EQC; AAA/Stable) remains uncertain, however, due to the
complexity involved in claims assessment and processing as a result of the
continued high level of seismic activity in the region. Issues contributing to
the uncertainty of determining the financial impact of each event include a
lack of access to the site to assess damage, the division between new and
existing damage, and the application of EQC cover for additional events in
some circumstances.
The EQC and insurers, via the Insurance Council of New Zealand (ICNZ), have
agreed to approach the Wellington High Court to make a ruling on the complex
question of under what circumstances the EQC insurance is restated back to its
full limits after natural disaster damage. Neither the EQC or the ICNZ have
disclosed the number of claims that fall under the case, although the EQC has
stated that there is only a small number of situations whereby it is uncertain
as to whether the EQC will provide a further NZ$100,000 to cover a second
event. The impact on individual insurers is likely to be determined by
specific policy reinstatement terms that will vary across providers. There is
some noise from market participants suggesting the decision will impact a
larger number of cases than the "small number" indicated by the EQC.
In our view, the EQC is likely to continue to have capacity to meet potential
obligations. Total estimated net costs of the September and February
earthquakes are around the NZ$3 billion mark, compared to a fund balance of
NZ$6.5 billion prior to September. Net costs have been capped by the NZ$1.5
billion Maximum Event Retention (MER) under relevant reinsurance policies,
although some risk of exposure in excess of reinsurance protection remains. In
the event of exhausting the current fund, the ECQ has the legislated ability
to call on government resources. We believe the primary insurance sector was
mindful in reinstating reinsurance protection of subsequent events after the
February earthquakes, with the most recent events expected to be covered under
those programs.
SOVEREIGN
While there are no estimates of additional costs to the sovereign (including
on the central government's share of local government infrastructure, roads,
insurance excesses on schools and hospitals, temporary housing, and other
policy responses) from the latest earthquake, we do not expect them to be
significant. This reflects our understanding that the additional damage was
mostly to households and structures already affected by the earlier quakes,
and that repair costs are likely to be met by the government's already fully
provisioned NZ$5.5 billion Canterbury Earthquake Recovery Fund.
New Zealand's 'AA+' foreign currency rating is currently on a negative
outlook, reflecting the possibility of a downgrade if New Zealand's external
position does not improve.
LOCAL COUNCIL
The ratings on Christchurch City Council (Christchurch) continue to be
supported by our expectation of on-going support in the recovery and
rebuilding process from the New Zealand government. Christchurch is
forecasting an operating deficit in fiscal 2010-2011 and the subsequent three
financial years. This is primarily due to lower revenue from rates, parking,
and dividends from its subsidiaries. We remain of the view that Christchurch
has some flexibility to take on additional debt at the current rating level,
and consider that it remains too early to assess the impact of the recurring
earthquakes on the local economy and any permanent impact on the council's
finances.
INFRASTRUCTURE
We view the medium-term impact of the tremors on international passenger
demand into Christchurch International Airport Ltd. (CIAL) as remaining
uncertain. This is particularly so as historically around 60% of passengers in
and out of the airport have been related to the leisure market, which in our
view, is more susceptible to changes in demand patterns. Specifically, until
aftershock frequency reduces, we believe that leisure group travelers--who
tend to plan their travel arrangements well in advance--are likely to redirect
their travel from the region, which could potentially result in a lagged
recovery. The negative outlook continues to reflect the uncertainty
surrounding:
The attractiveness of Christchurch as a travel destination and the
consequent impact on international passenger numbers through the airport; The ability of CIAL to continue to support domestic passenger levels over
the medium term; and The airport's ability to retain and attract key airline partners in the
medium term to support its route development. (see Bulletin dated March
16, 2011.)
The 'A-' long-term corporate credit rating on CIAL continues to reflect our
opinion that there is a "moderately high" likelihood that the New Zealand
airport's 75% shareholder, Christchurch City Holdings Ltd. (CCHL;
AA+/Negative/A-1+)–a wholly owned subsidiary of Christchurch City Council
--would provide timely and sufficient extraordinary support to the airport in
the event of financial distress to ensure the timely repayment of the group's
financial obligations. Going forward, our analysis will continue to focus on
not only CIAL's medium-term competitive position and financial profile, but
also the level of ongoing support from its owners. |
|
发表于 2011-7-15 02:35:01
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