Amlin to Buy Fortis Dutch Corporate Insurance Unit; S&P, Best Comment

June 4, 2009

The UK’s Amlin plc announced that it has entered into an agreement to acquire Fortis Corporate Insurance N.V. (FCI), an important provider of corporate P/C insurance in the Netherlands and Belgium, from the Dutch government for €350 million ($497 million).

Amlin, a major Lloyd’s, UK market and Bermuda insurer, said it would also announce separately a placement of “23,502,567 shares, representing approximately 5 per cent. of Amlin’s issued ordinary share capital, to institutional investors, in order to finance part of the consideration that is payable to the Seller. The balance of the consideration will be funded from Amlin’s existing cash resources.”

Shareholders’ approval of the deal will be will be “sought at a general meeting,” Amlin said.

Rating agencies Standard & Poor’s and A.M. Best reacted to the announcement somewhat differently. S&P affirmed its ‘BBB+’ long-term counterparty credit rating on Amlin, as well as its ‘A’ long-term counterparty credit and insurer financial strength ratings on its core operating entity Amlin Bermuda Ltd., and its ‘4’ Lloyd’s Syndicate Assessment on Amlin Underwriting – Syndicate 2001, all with stable outlooks.

Best, however, placed Amlin’s issuer credit rating (ICR) of “a-” under review with negative implications. Best also placed under review with negative implications the financial strength rating (FSR) of ‘A’ (Excellent) and ICR of “a” of Amlin Bermuda Limited and the Best’s Syndicate Rating of A+ and ICR of “aa-” of Lloyd’s Syndicate 2001.

Amlin listed a number of “key acquisition highlights,” including the following:
— Establishes a substantial Continental European platform, providing Amlin with immediate scale in a key strategic market and opportunities for future expansion
— Positions Amlin as a leading provider of marine, liability and commercial property insurance in the Netherlands and Belgium
— Expected to enhance earnings and return on equity (“ROE”) in 2009(1) and to contribute to Amlin’s cross cycle target ROE of at least 15 percent
— Diversifies Amlin’s portfolio in terms of geography, customer base, business lines and distribution
— Enhances Amlin’s overall business mix by increasing the proportion of commercial lines insurance
— Introduces an experienced management team to lead further European growth
— Increases the scale of the Group’s investment activities and presents scope for significant reinsurance synergies
— Enlarged Group will retain capital strength and flexibility for further profitable expansion where market conditions are favorable

Amlin also noted the strong market presence FCI has in corporate P/C coverage and risk management solutions in the Netherlands and Belgium. Headquartered in Amstelveen, the Netherlands, the Company also has offices in Rotterdam, Antwerp, Brussels and Paris. The Company is regulated in Holland and is “licensed to write most lines of non-life business across Europe with the exception of motor (only Belgium and the Netherlands) and credit insurance.”

Amlin’s acquisition is the latest event in the breakup of Fortis, which was heavily impacted by the global financial crisis. The Dutch government became the 100 percent shareholder of FCI last October when it nationalized the Dutch part of the Group’s banking and insurance activities.

S&P credit analyst Peter Grant explained the rating agency’s decision to affirm the ratings on Amlin as reflecting “our view that the short-term execution risks surrounding this transaction will be effectively managed, and longer term, the improved balance that the acquisition will bring to the enlarged group’s underwriting profile should be positive for Amlin.” S&P added that the stable outlook reflects its “expectation that the execution risks inherent in its proposed acquisition of FCI are manageable.”

Best said it had placed the ratings under review, as it “needs to evaluate the impact of the transaction on the group’s consolidated risk-adjusted capitalization and the execution risk inherent in such a transaction. Additionally, the stand-alone financial strength of FCI needs to be assessed.”

Sources: Amlin plc –; Standard & Poor’s – and A.M. Best –

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