S&P does not believe that insurers' decision to suspend dividends in response to the pandemic will hurt their credit profiles

21 April 2020 — Marina MAGNAVAL
Considering the financial impact of the coronavirus pandemic, some regulators are urging insurance companies to suspend dividends and other capital distributions and some of insurers are heeding that advice.

S&P Global Ratings believes such decisions won't hurt credit profiles of insurers since they are not necessarily based on weaknesses in the capital or liquidity positions, the agency wrote in the report:

"Dutch insurers Achmea B.V., ASR Nederland N.V., AEGON N.V., and NN Group N.V., as well as U.K.-based RSA Insurance Group PLC, Aviva PLC, and Hiscox Insurance Co. Ltd., among others, have decided to suspend paying common dividends or share buybacks. Conversely, groups such as QBE Insurance Co. (U.K.) Ltd., Legal & General Group PLC, and Allianz SE have decided to continue with the near-term distributions following careful consideration of supervisory guidance, while others have opted to delay annual shareholder meetings, in part to buy more time to weigh up considerations around dividend distributions."

Due to a high degree of uncertainty about the pandemic spread and peak, suspension of dividends could be used by insurers as a conservative way to manage cash and payouts, as already observed in the banking sector, S&P noted.
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