(The following statement was released by the rating agency)
LONDON, July 09 (Fitch) Fitch Ratings has assigned Admiral Group
proposed issue of subordinated debt securities an expected
'BBB-(EXP)'. The final rating is contingent on the receipt of
conforming to information already received. Concurrently, Fitch
Admiral Group plc an Issuer Default Rating (IDR) of 'A-'.
Fitch has also assigned Admiral Insurance (Gibraltar) Limited
Admiral Insurance Company Limited, the two main operating
entities of Admiral,
Insurer Financial Strength Ratings (IFS) of 'A+'. The Outlook on
ratings is Stable.
The notes are rated three notches below Admiral's IDR of 'A-' to
subordination and loss absorption features, in line with Fitch's
KEY RATING DRIVERS
The ratings reflect Admiral's solid risk-adjusted
underwriting margins and prudent reserving. The ratings are
Admiral's medium scale and concentrated business profile.
Admiral is a leading insurer in the UK personal motor market and
the owner of
confused.com, one of four major UK price comparison websites.
Admiral has grown
rapidly over the last 10 years and now has an estimated 11%
share of the UK
personal motor market, with total turnover of GBP2.0bn in 2013
Fitch views Admiral's level of risk-adjusted capitalisation as
solid for the
rating level. This view is supported by substantial co-insurance
arrangements, which provide significant capital relief to the
the reliance of the business model on these arrangements could
be regarded as
potentially negative, Fitch currently views these structures as
neutral to the
ratings as the programmes are secured under multi-year contracts
until 2016 and
The proceeds from the subordinated notes are expected to be used
to provide an
additional capital buffer ahead of Solvency II implementation
and to grow
Admiral's international operations as part of its strategic
subordinated bond has been structured to qualify as Lower Tier 2
current UK regulations and to count as Tier 2 capital under
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.
The securities are expected to be issued with a 10-year bullet
maturity and will
pay a fixed coupon semi-annually. Fixed-charge coverage is
expected to be solid
given Admiral's strong track record of earnings generation.
Admiral's ratings are further supported by its strong
reflected in a Fitch-calculated combined ratio (CR) of 81.2% in
addition, the group's co-insurance and reinsurance arrangements
allow for profit
commissions which vary with the level of underwriting profits on
Admiral's CR, including the beneficial effect of profit
commissions, was 60%,
the lowest within Fitch's rated UK non-life universe. Fitch
commission to remain a strong contributor to technical results
robust track record of technical profitability, reflected in a
CR of 89.7% (70.2% including profit commissions).
Fitch views Admiral's prudent reserving strategy positively. On
Admiral's prior year reserve releases over the past 10 years
have amounted to
12% of premiums earned. Even if market conditions do not improve
in the near
term, Fitch believes that Admiral's reserving position will
leave it better
placed than peers.
An upgrade is unlikely in the medium term given Admiral's
profile and limited geographical diversification.
A downgrade could be triggered by a substantial erosion of
to a sustained increase in net underwriting leverage
(premiums/equity) to 1.5x
(2013: 0.9x). A marked deterioration in technical and/or overall
particularly compared with peers, could also result in a
A downgrade may also result from a loss of its co-insurance
in an immediate and significant increase in capital requirements
significant falls in business volumes.
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London E14 5GN
+44 20 3530 1211
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Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153,
Additional information is available on 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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