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

LONDON--()--Fitch Ratings has affirmed Amlin group's operating companies Amlin AG's and Amlin Europe N.V.'s Insurer Financial Strength (IFS) ratings at 'A+', and the holding company's, Amlin plc, Long-term Issuer Default Rating (IDR) at 'A-'. The Outlook is Stable. Fitch has also affirmed Amlin plc's subordinated notes at 'BBB-'.

KEY RATING DRIVERS

Amlin's ratings reflect the group's strong London market position, strong technical profitability and supportive level of risk adjusted-capitalisation.

The ratings are supported by Amlin's strong underwriting performance which Fitch expects to be maintained. The 1H14 reported combined ratio was 87% (1H13: 85%). This was aided by a relatively low burden from catastrophe losses (1H14: GBP48.9m, 1H13: GBP32.2m) and GBP40.1m of reserve releases (1H13: GBP61.4m).

Amlin's risk-adjusted capitalisation is commensurate with its ratings. Fitch expects Amlin's capitalisation to remain strong and stable, supported by retained earnings. Shareholders' funds remained stable at GBP1.67bn at end-1H14 (end-2013: GBP1.69bn).

Fitch believes that investment returns are likely to remain subdued due to low interest rates. In 1H14, net investment income contributed GBP54.9m (1H13: GBP67.4m). However, overall net income of GBP136m in 1H14 (1H13: GBP140.2m) was strong and in line with the company's historical performance which Fitch expects to be maintained.

With GBP1.9bn of gross written premiums in 1H14, Amlin is one of the largest London market players. Fitch views its significant presence in the Lloyd's market as a positive. This also allows Amlin to use Lloyd's global licence network and financial strength when writing business through its syndicates. Amlin Syndicate 2001 benefits from a strong track record and good reputation among brokers. As a result, Amlin is the lead on a large amount of the business it underwrites through this platform.

RATING SENSITIVITIES

A downgrade could be triggered by a prolonged decline in capitalisation as reflected in, for example, an increase in the ratio of net written premiums to equity to 1.5x (2013: 1.3x). A combined ratio consistently above 97% (2013: 85.2%) or return on equity consistently below 10% (2013: 18.8%) could also lead to a downgrade.

Fitch considers an upgrade of Amlin's ratings unlikely given the group's market position and size/scale, which is not expected to change materially in the medium term.

Additional information is available on www.fitchratings.com.

Applicable criteria, 'Insurance Rating Methodology' dated 4 September 2014, are available on www.fitchratings.com

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756650

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=949495

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Contacts

Fitch Ratings
Primary Analyst
Anna Bender
Associate Director
+44 20 3530 1671
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
or
Secondary Analyst
Martyn Street
Senior Director
+44 20 3530 1211
or
Committee Chairperson
David Prowse
Senior Director
+44 20 3530 1250
or
Media Relations:
Elaine Bailey, +44 203 530 1153 (London)
elaine.bailey@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Anna Bender
Associate Director
+44 20 3530 1671
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
or
Secondary Analyst
Martyn Street
Senior Director
+44 20 3530 1211
or
Committee Chairperson
David Prowse
Senior Director
+44 20 3530 1250
or
Media Relations:
Elaine Bailey, +44 203 530 1153 (London)
elaine.bailey@fitchratings.com