Best Affirms Brit Insurance ‘A’ Rating

August 17, 2004

A.M. Best Co. announced that it has affirmed the financial strength rating of “A” (Excellent) of the U.K.’s Brit Insurance Limited (BIL). At the same time Best assigned BIL an issuer credit rating (ICR) of “a”. Best said the newly assigned ICR reflects its opinion, expressed in the credit market scale, of BIL’s overall ability to meet its senior obligations, which are insurance policies, and hence both ratings are at the same level.

Best has also affirmed the “bbb” issuer credit rating of Brit Insurance Holdings PLC (BIH) and the ratings of its debt issues. “BIH is a non-operating holding company, and the level of its ICR illustrates the principle of standard notching from the operating company’s (BIL’s) rating (see A.M. Best’s Ratings and the Treatment of Debt at and reflects the subordinated nature of the most senior obligations at the holding company level,” said Best. The outlook for all ratings is stable.

“The ratings of BIL reflect its strong prospective risk-adjusted capitalisation supported by improving diversification and the addition of lower risk lines of business,” the report continued. “Explicit inter-availability of capital between BIL and its subsidiary, Brit Insurance UK Limited, is achieved through whole account stop loss contracts. BIL’s risk-adjusted capitalisation factors the risks associated with commencing underwriting several new classes of business and the company’s rapid growth (70 percent growth in gross premium anticipated for 2004 to GBP 660 million [USD 1,203 million]). It also factors BIL’s likely future dividend payments to its parent company (up to 70 percent of BIL’s profit after tax).”

Best said it “expects BIL’s combined ratio to deteriorate at year-end 2004 but believes that performance is still likely to be excellent for the diversified account that is now written. These expectations include the estimated impact from Hurricane Charley discussed with BIL. Prospectively, operating performance is likely to be more stable given the reduced exposure to catastrophe losses (catastrophe retrocession expected to account for 4 percent of gross premiums written in 2004, down from 12 percent in 2003 and 33 percent in 2002). In addition, the strength of BIL’s profile in the UK regions and London market is increasing.”

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