OREANDA-NEWS. S&P Global Ratings said today that it affirmed its 'A-' long-term counterparty credit and insurer financial strength ratings on Delta Lloyd Levensverzekering N. V. and Delta Lloyd Schadeverzekering N. V., the core operating companies of the Delta Lloyd N. V. group (DL). We also affirmed our 'BBB' counterparty credit rating on DL holding company Delta Lloyd N. V. and Delta Lloyd Treasury B. V., and affirmed all related debt ratings. The outlook is negative.

The rating action follows the announcement by Netherlands-based insurer NN Group of its intention to buy DL. The affirmation balances our views that the potential positive impact on DL's creditworthiness from an acquisition by a larger and higher-rated insurer could be offset by uncertainties surrounding the capital and earnings and financial flexibility of the combined group after the transaction. Uncertainties on DL's strategic positioning within a larger group and in the Dutch market, and on the completion of its ongoing de-risking actions, are also factors that limit the upside potential of an acquisition. At the same time, we do not view this potential transaction as likely to have a short-term negative impact on DL's balance sheet or business profile.

If the acquisition goes ahead, DL will either become a subgroup within the wider NN Group, or will be merged into NN to maximise cost synergies.

As a subgroup within NN, DL ratings may benefit from uplift for group support. However, we remain uncertain on the consequences of such a move on the creditworthiness of the combined group, particularly with regards to capital and earnings and financial flexibility post transaction. We would seek more information on medium-term integration plans, business synergies, and the strategic positioning of both brands in The Netherlands before making an assessment of DL's strategic importance to NN and the extent of group support it would receive.

The negative outlook reflects the execution risk linked to Delta Lloyd's ongoing efforts to derisk its balance sheet, strengthen financial flexibility, and sustain the turnaround of its operating performance. We consider that DL's balance sheet derisking is almost complete but it is yet to make tangible progress on improving financial flexibility and operating performance.

We could lower the rating over the next 6-24 months if DL's financial risk profile deteriorates, as demonstrated by capital adequacy falling below the 'BBB-' benchmark, its fixed-charge coverage declining below 4x, or its operating performance metrics continue to compare unfavorably with Dutch peers.

We could revise the outlook to stable over the next 12-24 months if DL's financial risk profile stabilizes, as indicated by a sustainable improvement in earnings, fixed-charge coverage remaining above 4x, and its capital adequacy maintained above the 'BBB-' benchmark.