S&P Assigns 'AA' Financial Strength Rating to ABB Power Insurance
Standard & Poor's today assigned its double-'A' financial strength and counterparty ratings to ABB Power Insurance Ltd. The outlook is stable. The rating is based on the company's position as the single captive insurer of ABB Power Generation Ltd., which is an integral subsidiary of ABB Asea Brown Boveri Ltd. (rated double-'A'/Stable/'A-1'-plus).
Major Rating Factors
As the single captive of ABB Power Generation, ABB Power Insurance benefits from the support of a financially strong parent. As a result, ABB Power Insurance's financial strength and rating is in lockstep with the rating of ABB Asea Brown Boveri and related entities. The parent company helps ABB Power Insurance to act as a serious and professional technical insurance/reinsurance company.
Standard & Poor's believes that ABB Power Insurance forms an integral part of ABB Power Generation's sales support activities. With more gas turbine projects being operated by independent power producers, ABB Power Generation places an increasing emphasis on financial services to support its manufacturing operations. Through ABB Power Insurance, ABB Power Generation directly addresses one of the specific requirements of private sector funding, by providing insurance coverage for new technology risks.
As a start-up venture, ABB Power Insurance lacks a demonstrable business and earnings track record. The company follows strict operating guidelines, exclusively covering risks related to ABB Power Generation's gas turbine projects. Hence business development will depend on the parent's performance in this sector.
Expectations
ABB Power Insurance's stand-alone capitalization will strengthen as the parent gradually increases the company's capital to at least Swiss francs (SFr) 120 million (US$80 million) by 2001. Standard & Poor's believes that ABB Power Generation is willing to provide financial support should the need arise. The company expects premiums to increase by approximately SFr20 million per year, which reflects mid-single-digit growth at the parent company. Growth will mainly come from the Far East and South America, Standard & Poor's said.