March 5 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Brit Insurance Holdings B.V.'s Long-term Issuer Default
Rating (IDR) at 'BBB+' with a Stable Outlook and its subordinated notes at 'BB+'.
KEY RATING DRIVERS
The affirmation is in response to the announcement made on 04 March 2014 of the
intention to float the Brit group (Brit) on the London Stock Exchange. The
affirmations and Stable Outlook reflect the agency's view that the initial
public offering (IPO) of a 25% minimum free float is a marginal credit positive.
The agency recognises the improvements that have been made to Brit's
underwriting performance since the company was taken into private ownership and
views the announcement of the IPO as a natural progression for the insurer,
which removes some uncertainty around the possibility and nature of a return to
Fitch will closely monitor Brit's post-IPO profile, specifically in relation to
the size and timing of any further share sales, dividend strategy and overall
capitalisation. Fitch also notes the shareholder lock-up arrangements which
prevent any further sales by the majority shareholders, Apollo and CVC, for 180
days and by management and other employees for 365 days following completion of
The affirmations also reflect the solid financial profile of Brit, which is
supported by a strong level of risk-adjusted capitalisation and underlying
earnings. The group reported an overall profit after tax for 2013 of GBP101.7m
(2012: GBP84.7m). The reported combined ratio, excluding FX effects, was 85.2%
(2012: 93.2%), which was assisted by the continued benign catastrophe
Brit will continue to be majority owned by Achilles Netherlands Holdings B.V, a
holding company majority owned by funds managed by Apollo Management VII, L.P.
and funds advised by CVC Capital Partners Ltd.
Key rating triggers for a downgrade include failure by Brit to maintain
financial leverage and capitalisation at levels at least commensurate with the
current ratings. Any marked shift towards a more risky investment portfolio
could lead to negative rating pressure.
Fitch views a rating upgrade as unlikely in the near term. Over the longer term,
key triggers for a rating upgrade would be an increase in the size and scale of
the company, as well as maintenance of current underwriting performance, coupled
with capitalisation commensurate with a better-than-current rating level.