July 9, 2014 / 2:51 PM / in 4 years

Fitch Affirms Brit Insurance Holdings B.V.'s IDR at 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) LONDON, July 09 (Fitch) 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 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 (2012: GBP84.7m). The reported combined ratio, excluding FX effects, was 85.2% (2012: 93.2%), which was assisted by a continued benign catastrophe environment. Fitch views positively Brit's streamlined operational structure, writing solely 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 these changes, 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 market environment in Europe and the US continues to stabilise, in an effort to increase the investment yield on its assets. This has resulted in increased investment risk as measured by a risky assets (non-investment grade bonds, 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 company to public ownership, was a natural progression for the insurer, which removes some uncertainty around the possibility and nature of a return to public ownership. Fitch recognises the improvements that have been made to Brit's underwriting performance since the company was taken into private ownership and views the IPO as a marginal credit positive. 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. 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. RATING SENSITIVITIES A combined ratio consistently above 97%, or a marked shift towards a higher-risk investment portfolio as represented by a risky assets-to-equity ratio greater 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 underwriting performance, could lead to an upgrade. Contact: Primary Analyst Graham Coutts Associate Director +44 20 3530 1654 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 on 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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