Moody's rates Intact notes A3

Moody's Investors Service said it assigned an A3 rating to the C$300 million of senior notes due 2021 to be issued by Intact Financial Corp. and then placed the rating under review for possible downgrade.

The rating review began on May 31 following the company's announcement that it agreed to acquire AXA Canada Inc. for C$2.6 billion in cash because of the expected increase in the company's financial leverage. Proceeds from the notes will be used to partially fund the acquisition.

The agency said Intact's A3 senior debt rating is based on the company's excellent market position in the highly fragmented Canadian property and casualty industry, strong reserve adequacy with consistently favorable prior-year development and a risk management discipline that has produced good underwriting results.

Intact's credit strengths are partially offset by a narrow business model that has a significant weighting towards Canadian personal auto insurance, a sizable exposure to preferred shares issued by Canadian financial institutions, a reliance on third-party brokers for distribution as well as exposure to natural catastrophes, Moody's said.

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