From the ING Canada 4Q08 Press Release:
Preferred shares and debt securities were not impaired. Preferred shares are generally only impaired if the issuer is significantly downgraded, stops paying dividends, or declares bankruptcy. After careful review, management determined that there was no objective evidence at the time of assessment which suggested the company would not receive the contractual cash flows from these securities, which include either dividends or interest payments. Management uses third party credit ratings as well as other public information in its analysis of the quality of debt securities and preferred shares.
According to page 13 of the report, their unrealized loss on Prefs was $522.5-million. Thats on a book value (page 30) of $1,220.1. And you thought YOU had a bad year! They include prefs with equity, by the way.
Page 23 states:
ING Canada Inc.’s long-term issuer rating with Moody’s Investors Services is A3 and the company’s five principal operating insurance subsidiaries are rated Aa3 for insurance financial strength (IFS). ING Canada Inc.’s unsecured debt would be rated A (low) by DBRS. ING Canada Group has an A+ (Superior) rating from A.M. Best.
Let’s have a little peek at the balance sheet … shareholders’ equity as stated is $2,632.6-million, less intangibles of $217.8 leaves $2,414.8-million.
Debt securities of $3,832.5-million implies leverage there of 159%. Equities of $2,015.1 implies leverage of 83% … and most of that is prefs.
The company is now independent of ING Groep. We want a pref issue!
Update: I’m not sure how enthusiastic I am about the insurers owning a lot of each other’s (OK, and maybe the banks’) preferred shares. To me, that increases the chance of systemic collapse.
Update, 2010-7-28: Note that ING Canada is now Intact Insurance. Now that I have the word “Intact” in this post, perhaps I’ll be able to find it in less than half an hour next time!