July 6, 2017 / 8:27 AM / in 2 years

Fitch Affirms Admiral's IFS Rating at 'A+'; Outlook Stable

(The following statement was released by the rating agency) LONDON, July 06 (Fitch) Fitch Ratings has affirmed Admiral Insurance (Gibraltar) Limited's and UK-based Admiral Insurance Company Limited's - the two main operating entities of Admiral Group plc (Admiral) - Insurer Financial Strength (IFS) Ratings at 'A+' (Strong). The agency has also affirmed Admiral's Long-Term Issuer Default Rating (IDR) at 'A' and subordinated notes at 'BBB'. The Outlook on the IFS Ratings and IDR is Stable. KEY RATING DRIVERS The affirmation reflects Admiral's very strong financial performance and earnings, strong capitalisation, which benefits from significant use of co-insurance and reinsurance arrangements, continuing leading position in the UK motor insurance market, and prudent reserving practices. The ratings are constrained by Admiral's medium scale and a concentrated business profile. Fitch views Admiral's track record of technical profitability as very strong and expects that Admiral will maintain its robust underwriting performance. In 2016, Admiral's underwriting results were impacted by a change in the Ogden discount rate used to calculate lump-sum payments in large bodily injury cases in the UK. The significant reduction in the Ogden discount rate to -0.75% from 2.5% meant that UK insurers had to substantially increase their reserves held for open and not yet notified claims on business earned prior to the change. As a result, Admiral's profit before tax for 2016 fell to GBP284 million, from GBP390 million on a pre-Ogden basis, and Admiral's reported combined ratio deteriorated to 94.4% (86.7% pre-Ogden and 85.6% in 2015). Earnings are expected to be reduced by a further GBP65 million over the next three to five years in total as a result of lower reserve releases and profit commissions. Admiral implemented price increases on UK motor insurance ahead of the announcement on the new Ogden discount rate and further price increases following the change in the discount rate, helping it to mitigate some of the Ogden impact. Fitch views positively Admiral's ability to implement price changes within a short time, allowing the group to respond rapidly to changing market conditions. Admiral's capital position is 'Extremely Strong' as measured by Fitch's Prism Factor-Based Model (FBM) capital score. The insurer's financial profile, including capitalisation, benefits from significant use of co-insurance and reinsurance arrangements, with Admiral sharing 30% of its UK motor insurance risks on a co-insurance basis and 10% on a quota share basis with Great Lakes, a subsidiary of Munich Re (IFS AA/Stable). The arrangements with Great Lakes are secured under multi-year contracts until 2020 and further quota share agreements are in place until at least 2018, providing substantial capital relief to Admiral. Fitch views the credit quality of Admiral's co-insurance and reinsurance counterparties as very strong. Admiral's ratings are constrained by a concentrated business profile. UK car insurance is the main contributor to the group's profits and accounts for 83% of total net premiums earned. While Admiral's international operations are developing well, they are still small relative to the overall group. Fitch takes a positive view of Admiral's prudent reserving strategy. Over the past 10 years, Admiral's prior-year reserve releases, excluding reserve releases on commuted reinsurance, averaged 14% of net premiums earned. The insurer's strategy is to maintain a buffer above actuarial best estimate, allowing the group to support underwriting results with reserve releases every year. RATING SENSITIVITIES A marked deterioration in technical or overall profitability, particularly compared with peers, could result in a downgrade. A downgrade could also be triggered by a substantial erosion of capital equivalent to a sustained increase in net underwriting leverage (net written premiums/equity) to 1.5x (2016: 1.0x). A downgrade may also result from a loss of Admiral's co-insurance contract, resulting in an immediate and significant increase in capital requirements or significant falls in business volumes. An upgrade is unlikely in the medium term given Admiral's concentrated business profile and limited geographical diversification. Contact: Primary Analyst Ekaterina Ishchenko Associate Director +44 203 530 1532 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Graham Coutts Director +44 203 530 1654 Committee Chairperson Chris Waterman Managing Director +44 203 530 1168 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy 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 WEB SITE AT 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below