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Sept 11 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Norway-based KLP Banken AS Group’s (KLP Banken) and its covered bond issuing subsidiary, KLP Kommunekreditt AS’s Long-term Issuer Default Ratings (IDR) at ‘A-’ with Stable Outlooks. At the same time, the agency has affirmed both entities’ Short-term IDRs at ‘F2’ and Support Ratings at ‘1’.
Both entities’ ratings are driven by institutional support from their ultimate parent, Kommunal Landspensjonskasse (KLP). KLP is one of Norway’s largest life insurance companies with total assets of NOK376bn at end-June 2013. KLP’s Long-term IDR of ‘A’ and Insurer Financial Strength Rating of ‘A+’ were affirmed on 30 August 2013 with Stable Outlooks (see “Fitch Affirms KLP IFS at ‘A+'; Outlook Stable”, dated 30 August 2013 at www.fitchratings.com).
As they are support driven, KLP Banken’s and KLP Kommunekreditt AS’s IDRs are sensitive to any change in KLP’s IDRs or a change in Fitch’s assessment of the probability or willingness of KLP to support the two entities. The IDRs are one notch below KLP’s IDR, which reflects the two entities’ strategic importance.
The strategic importance is driven by shared branding, strong synergies providing greater product penetration to its customers and the high level of integration.
Fitch considers that there continues to be an extremely high probability of support in case of need for both entities, given high reputational risk for KLP.
KLP has previously provided support to KLP Banken and KLP Kommunekreditt through loan purchases to provide liquidity and capital injections.
The Support Ratings are sensitive to a change in Fitch’s assessment of the probability or willingness of KLP to support the two entities.
KLP Kommunekreditt AS is a wholly owned subsidiary of KLP Banken and a leading brand name in the Norwegian public sector lending space. The ratings are equalised with those of KLP Banken due to reputational risk for KLP Banken and ultimately KLP and the high level of integration into KLP Banken.