Fitch Assigns Admiral plc's Subordinated Debt Issue 'BBB-' Final Rating

Wed Aug 6, 2014 11:40am EDT

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(The following statement was released by the rating agency) LONDON, August 06 (Fitch) Fitch Ratings has assigned Admiral plc's (Admiral, holding company Issuer Default Rating (IDR) of A-/Stable) issue of subordinated debt securities of GBP200m a 'BBB-' final rating. The notes are rated three notches below Admiral's IDR of 'A-' to reflect their subordination and loss absorption features, in line with Fitch's notching criteria. The assignment of the final rating follows the completion of the bond issuance and receipt of documents conforming to the information previously received. The final rating is the same as the expected rating Fitch assigned on 20 June 2014. KEY RATING DRIVERS The securities have a 10-year bullet maturity and pay a 5.5% fixed coupon semi-annually. The scheduled maturity date is 25 July 2024. The notes include interest deferral features which are triggered if regulatory solvency is at risk. Following the bond issuance, Admiral's Fitch-calculated pro-forma financial leverage based on FY13 numbers is 27.6%, in line with Fitch's medians for companies rated in the 'A' category. Fixed-charge coverage is expected to be solid given Admiral's strong track record of earnings generation. The subordinated bond has been structured to qualify as Lower Tier 2 capital under current UK regulations and to count as Tier 2 capital under Solvency II. According to Fitch's methodology, this subordinated bond is classified as 100% capital within Fitch's own capital assessment and is classified as 100% debt for the agency's financial leverage calculations. RATING SENSITIVITIES An upgrade is unlikely in the medium term given Admiral's concentrated business profile and limited geographical diversification. A downgrade could be triggered by a substantial erosion of capital, equivalent to a sustained increase in net underwriting leverage (premiums/equity) to 1.5x (2013: 0.9x). A marked deterioration in technical and/or overall profitability, particularly compared with peers, could also result in a downgrade. A downgrade may also result from a loss of its co-insurance contract, resulting in an immediate and significant increase in capital requirements and/or significant falls in business volumes. Contact: Primary Analyst Anna Bender Associate Director +44 20 3530 1671 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Martyn Street Senior Director +44 20 3530 1211 Committee Chairperson Harish Gohil Managing Director +44 20 3530 1257 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Insurance Rating Methodology', dated 13 November 2013 are available at www.fitchratings.com. Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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