Morningstar DBRS Confirms and Upgrades Credit Ratings on PCL Funding I Limited, PCL Funding VIII PLC and PCL IX PLC

DBRS Ratings Limited (Morningstar DBRS) took the following credit rating actions on the notes (the Notes) issued by the outstanding PCL Funding related issuers as follows:

PCL Funding I
-- Class A Senior ETNs of Series 2012 Senior VFN confirmed at AAA (sf)

PCL Funding VIII
-- Series 2023-1 Class A Notes confirmed at AAA (sf)
-- Series 2023-1 Class B Notes upgraded to AA (low) (sf) from A (high) (sf)
-- Series 2023-1 Class C Notes upgraded to A (sf) from A (low) (sf)

PCL Funding IX
-- Series 2024-1 Class A Notes confirmed at AAA (sf)
-- Series 2024-1 Class B Notes confirmed at A (high) (sf)
-- Series 2024-1 Class C Notes upgraded to A (sf) from A (low) (sf)

The credit ratings address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date.

The Notes are backed by the same portfolio of financing advances made by Premium Credit Limited (PCL, the originator) to companies and individuals domiciled in the United Kingdom of Great Britain and Northern Ireland (UK) and the Republic of Ireland (Ireland) for non-life insurance premia and other payment plans. PCL is also the servicer with Link Financial Outsourcing Limited (Link) as the backup servicer.

The above credit rating actions reflect the stable collateral portfolio compositions over the past decade compared with the theoretically worst limits and are based on the following analytical considerations:
-- The transactions' structure, including the form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the Issuers' financial obligations according to the terms under which the Notes are issued
-- The credit quality and the diversification of the collateral portfolio, its historical performance and the projected performance under various stress scenarios
-- The originator's capabilities with respect to origination, underwriting and servicing and Link's capability with respect to servicing
-- Morningstar DBRS' operational risk review of the originator, which is deemed to be an acceptable servicer
-- The transaction parties' financial strength regarding their respective roles
-- Morningstar DBRS' long-term sovereign credit ratings of the UK, currently AA with a Stable trend and Ireland, currently AA (low) with a Stable trend
-- The consistency of the transactions' legal structure with the Morningstar DBRS "Legal and Derivative Criteria for European Structured Finance Transactions" methodology

TRANSACTION STRUCTURE
The Notes are issued out of the PCL-related master issuance structure, where all outstanding series of notes are supported by the same pool of receivables and are generally issued under similar conditions regarding servicing, amortisation events, priority of distributions and concentration limits.

More information on PCL Funding I, PCL Funding VIII, and PCL Funding IX can be found at https://www.dbrsmorningstar.com/issuers/18769, https://dbrs.morningstar.com/issuers/29361, and https://dbrs.morningstar.com/issuers/30287, respectively.

COUNTERPARTY
HSBC Bank plc (HSBC Bank) is the account bank for the above transactions. Based on Morningstar DBRS' private credit rating on HSBC Bank and the downgrade provisions outlined in the transaction documents, Morningstar DBRS considers the risk arising from the exposure to the account bank to be commensurate with the credit ratings assigned.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
As of 31 January 2025, the 13-week average delinquency and default ratios were 1.29% and 0.48%, substantially below the respective trigger levels of 3.75% and 2.25%. On the other hand, the 13-week average payment ratio was 4.6%, above the trigger level of 3.5%.

In addition, Morningstar DBRS noted the portfolio product segment compositions have remained largely stable over the past decade compared with the theoretically worst limits permitted by the replenishment criteria and derived asset assumptions by product segment whose performance has also remained largely stable over the past decade with some increases in recoveries and decreases in termination (default) rates, despite the current inflationary pressures and elevated interest rate. Furthermore, the declining trend of the Bank of England base rate since August 2024 attributes more excess spread to the transactions and provides more credit enhancement to the Notes.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS credit rating on the Notes also addresses the credit risk associated with the increased rate of interest applicable to the Notes if the Notes are not redeemed on the scheduled amortisation date as defined and in accordance with the applicable transaction document(s).

Morningstar DBRS' credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
There were no Environmental, Social or Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024): https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the credit ratings is Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024) https://dbrs.morningstar.com/research/439583.

Other methodologies referenced in this transaction are listed at the end of this press release.

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transactions, the analysis continues to be the potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include updated portfolio performance and data provided by the originator through Lloyds Bank Corporate Markets plc in respect of vintage defaults, recoveries and net losses split by product type and jurisdiction from 2007 to 2024 and stratification tables in relation to the collateral pool as of 31 January 2025.

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit rating, Morningstar DBRS was not supplied with third-party assessments for PCL Funding I, PCL Funding VIII or PCL Funding IX. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on PCL Funding I and PCL Funding VIII took place on 12 April 2024, when Morningstar DBRS confirmed its credit ratings. The last rating action on PCL Funding IX took place on 13 June 2024, when Morningstar DBRS finalised its credit ratings.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating:

PCL Funding I
-- Expected probability of default (PD): 7.4%
-- Expected loss given default (LGD): 25.7%

PCL Funding VIII
-- Expected PD: 7.4%
-- Expected LGD: 26.0%

PCL Funding IX
-- Expected PD: 7.4%
-- Expected LGD: 25.6%

-- Scenario 1: A 25% increase in expected PD
-- Scenario 2: A 50% increase in expected PD
-- Scenario 3: A 25% increase in expected LGD
-- Scenario 4: A 25% increase in expected PD and 25% increase in expected LGD
-- Scenario 5: A 50% increase in expected PD and 25% increase in expected LGD
-- Scenario 6: A 50% increase in expected LGD
-- Scenario 7: A 25% increase in expected PD and 50% increase in expected LGD
-- Scenario 8: A 50% increase in expected PD and 50% increase in expected LGD

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios are:

PCL Funding I
-- Class A Senior ETNs of Series 2012 Senior VFN: AAA (sf), AA (high) (sf), AAA (sf), AA (high) (sf), A (high) (sf), AA (high) (sf), AA (low) (sf), A (high) (sf)

PCL Funding VIII
-- Series 2023-1 Class A Notes: AAA (sf), AAA (sf), AAA (sf), AAA (sf), AA (high) (sf), AAA (sf), AA (high) (sf), A (high) (sf)
-- Series 2023-1 Class B Notes: AA (low) (sf), A (high) (sf), AA (low) (sf), A (high) (sf), A (low) (sf), A (high) (sf), A (low) (sf), BBB (high) (sf)
-- Series 2023-1 Class C Notes: A (sf), BBB (high) (sf), A (sf), BBB (high) (sf), BBB (high) (sf), A (low) (sf), BBB (high) (sf), BB (high) (sf)

PCL Funding IX
-- Series 2024-1 Class A Notes: AAA (sf), AA (high) (sf), AAA (sf), AA (high) (sf), AA (low) (sf), AA (high) (sf), AA (low) (sf), A (high) (sf)
-- Series 2024-1 Class B Notes: A (high) (sf), BBB (high) (sf), A (high) (sf), BBB (high) (sf), BBB (high) (sf), A (low) (sf), BBB (high) (sf), BB (high) (sf)
-- Series 2024-1 Class C Notes: BBB (high) (sf), BBB (high) (sf), A (low) (sf), BBB (high) (sf), BB (high) (sf), BBB (high) (sf), BB (high) (sf), BB (high) (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Jeffrey Cespon, Vice President
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Rating Date:
PCL Funding I: 31 October 2012 (Restructured on 2 February 2017)
PCL Funding VIII: 14 April 2023
PCL Funding IX: 8 May 2024

DBRS Ratings Limited
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Registered and incorporated under the laws of England and Wales: Company No. 7139960

The credit rating methodologies used in the analysis of this transaction can be found athttps://dbrs.morningstar.com/about/methodologies.

-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024) https://dbrs.morningstar.com/research/439583
-- Rating European Structured Finance Transactions Methodology (19 November 2024) https://dbrs.morningstar.com/research/443199
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024) https://dbrs.morningstar.com/research/443196
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024) https://dbrs.morningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024) https://dbrs.morningstar.com/research/439913
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024) https://dbrs.morningstar.com/research/437781
-- Global Methodology for Rating CLOs and Corporate CDOs (19 November 2024) https://dbrs.morningstar.com/research/443207 and Morningstar DBRS CLO Asset model (version 1.0.1.4)
-- Rating CLOs Backed By Loans to European SMEs (19 November 2024) https://dbrs.morningstar.com/research/443198 and Morningstar DBRS SME Diversity Model (version 2.7.1.5)
-- Currency Stresses for Global Structured Finance Transactions (19 November 2024) https://dbrs.morningstar.com/research/443202

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.