Dexia Insurance Belgium's parent Eurco sees ratings upgraded

Fitch Ratings has upgraded parent group Eurco Re's insurer financial strength rating to 'BBB+' from 'BBB'. The outlook is stable.

The upgrade reflects Fitch's view that ongoing uncertainty regarding the business rationale for Eurco Re has reduced. Fitch previously downgraded Eurco Re's rating due to concerns about these points. Eurco Re's stable outlook reflects that held on the Dexia Group.

The rating factors in group support, which Fitch believes would be made available at the DIB level and, if required, by the wider Dexia Group: reflecting the importance of Eurco Re to DIB.

An offsetting factor to the rating continues to be the company's small scale, limited diversification and a high reliance on business coming from DIB.

Consequently, the current IFS rating is some way above the rating derived from Eurco Re's standalone financial profile. Fitch considers that the 2010 financial positions of Eurco Re and that of its immediate parent, DIB, have not changed materially.

Eurco Re's Fitch-assessed capital and the reinsurer's consistent profitability are viewed positively although these factors are less material to the rating. Profit after tax was €14.9m for 2010 compared with €12.4m in 2009. Fitch expects any growth to be organic, stemming largely from the Dexia franchise, with limited prospects for third-party growth.

Eurco Re's ratings could be upgraded if the rating of Dexia itself was to be upgraded or if Fitch were to view Eurco Re as substantially more important to DIB. Conversely, Eurco Re's ratings could be downgraded if Dexia were to be downgraded or if Eurco Re's level of importance to DIB were to decline.

Eurco Re is based in Dublin and licensed by the Central Bank of Ireland to operate as a reinsurance company. It is a fully controlled subsidiary of DIB. DIB is the main entity of Dexia Group's insurance business. DIB and its subsidiaries contributed around EUR211m to Dexia group profits in 2010.