(The following statement was released by the rating agency)
LONDON, July 09 (Fitch) Fitch Ratings has affirmed Brit
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 ratings reflect the solid financial profile of the Brit
group (Brit), which
is supported by strong risk-adjusted capitalisation and
underlying earnings. The
group reported an overall profit after tax for 2013 of GBP101.7m
GBP84.7m). The reported combined ratio, excluding FX effects,
was 85.2% (2012:
93.2%), which was assisted by a continued benign catastrophe
Fitch views positively Brit's streamlined operational structure,
through Lloyd's of London (Lloyd's) as a dedicated global
specialty insurer and
reinsurer, and rebalancing of the underwriting portfolio to
focus on short tail
direct insurance and profitable specialty lines. As a result of
Brit's financial performance has improved, with the attritional
loss ratio on an
accident year basis falling to 51.3% in 2013 from 64.2% in 2009.
Fitch views the level of investment risk as high for the
ratings. Brit has
increased its exposure to both equity and credit markets, as the
environment in Europe and the US continues to stabilise, in an
increase the investment yield on its assets. This has resulted
investment risk as measured by a risky assets (non-investment
unaffiliated equities and investments in affiliates)-to- equity
ratio of 82% at
end-2013, which is high compared with peers.
Brit's initial public offering (IPO), which returned 25% of the
public ownership, was a natural progression for the insurer,
which removes some
uncertainty around the possibility and nature of a return to
Fitch recognises the improvements that have been made to Brit's
performance since the company was taken into private ownership
and views the IPO
as a marginal credit positive. Fitch will closely monitor Brit's
profile, specifically in relation to the size and timing of any
sales, dividend strategy and overall capitalisation.
Brit continues 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.
A combined ratio consistently above 97%, or a marked shift
towards a higher-risk
investment portfolio as represented by a risky assets-to-equity
than 100%, could lead to a downgrade. Catastrophic events
leading to significant
underwriting losses relative to Brit's peer group could also
lead to downgrade.
A decrease in investment risk as measured by a risky
assets-to-equity ratio of
less than 50%, coupled with maintenance of current strong
performance, could lead to an upgrade.
+44 20 3530 1654
Fitch Ratings Limited
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London E14 5GN
+44 20 3530 1211
+44 20 3530 1257
Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153,
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Insurance Rating Methodology' dated 13
November 2013, are
available on www.fitchratings.com.
Applicable Criteria and Related Research:
Insurance Rating Methodology
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