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Fitch Affirms MS Amlin's IFS Rating at 'A'; Outlook Negative
October 6, 2016 / 3:56 PM / a year ago

Fitch Affirms MS Amlin's IFS Rating at 'A'; Outlook Negative

(The following statement was released by the rating agency) LONDON, October 06 (Fitch) Fitch Ratings has affirmed Amlin AG's and Amlin Insurance SE's Insurer Financial Strength (IFS) ratings at 'A'. The Outlook is Negative. The entities are MS Amlin group's operating companies. At the same time Fitch has affirmed the Issuer Default Rating (IDR) of MS Amlin's holding company, MS Amlin Plc, at 'A-'. The Outlook is Stable. MS Amlin plc's GBP230m subordinated notes have been affirmed at 'BBB-'. KEY RATING DRIVERS The IFS ratings of Amlin AG and Amlin Insurance SE are capped by the rating of MSI (IFS: A/Negative), a subsidiary of MS&AD Insurance Group (MS&AD Group). This cap reflects the risk that if MS&AD Group were to come under financial stress, it could seek to extract capital or other resources from Amlin AG and Amlin Insurance SE to support the rest of the group. Fitch views MS Amlin group as 'Very Important' in terms of strategic status within the MS&AD Group. This may be revised to 'Core' over time with evidence of increased integration and seasoning. The ratings reflect MS Amlin group's strong London Market position and good technical profitability. Although Fitch regards MS Amlin group as a medium-sized group with GBP2.7bn of gross written premiums (GWP) in 2015, it is nevertheless one of the largest London market operators. Its significant presence in the Lloyd's market is viewed as a positive by Fitch. MS Amlin group's technical performance has remained strong despite pressure on pricing. In 2015 MS Amlin group reported an overall rate reduction of 4% across its underwriting portfolio. However, it still reported a stable Fitch-calculated combined ratio of 88% in 2015. The robust performance predominantly reflects the absence of major catastrophe activity during the year. The largest event impacting MS Amlin group was the Port of Tianjin explosion in August 2015, which was estimated to have cost the group GBP18m. Fitch believes that MS Amlin group's reserves are strong and will continue to contribute to technical profitability. This is reflected in a five-year average ratio of reserve releases to prior year equity of 6%. However, reserve releases in 2015 were lower than the previous year at GBP80m (2014: GBP89.6m). MS Amlin group aims to hold a prudent margin above actuarial best estimate to provide consistent reserve strength. It estimated the excess above best estimate at end-2015 at GBP150m. Fitch views the level of risk assumed by MS Amlin group's investment strategy as low, with a high-risk assets-to-equity ratio of 39% in 2015 (2014: 44%). The group also has sound liquidity. Its ratio of liquid assets to policyholder liabilities was 139% in 2015 (2014: 140%). Fitch views MS Amlin group's debt-servicing ability as strong, reflected in a 10x fixed-charge coverage in 2015 (2014: 8x). The agency's view of MS Amlin group's good financial flexibility is driven by the number of internal and external funding options available to the insurer. RATING SENSITIVITIES The key rating trigger that could result in a downgrade of Amlin AG's and Amlin Insurance SE' IFS ratings would be a downgrade of MSI's IFS rating. Evidence of increased integration between MS Amlin group and MS&AD Group could lead to an upgrade of MS Amlin Plc's IDR and subordinated debt rating. Contact: Primary Analyst Graham Coutts Director +44 20 3530 1654 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Ekaterina Ishchenko Associate Director +44 20 3530 1532 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1012744 Solicitation Status here Endorsement Policy here ail=31 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. 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