16 February 2016 Insurance

Fitch downgrades Amlin following MSI acquisition

Fitch Ratings has downgraded Amlin and Amlin Insurance’s insurer financial strength (IFS) ratings to A from A+ but removed the firms from Rating Watch Negative (RWN).

The rating action follows the completion of the acquisition of Amlin by Mitsui Sumitomo Insurance (MSI) (IFS: A/Stable), a subsidiary of MS&AD Insurance Group (MS&AD Group).

The IFS ratings of Amlin and Amlin Insurance are capped by the new owner's rating, which has resulted in the one-notch downgrade. 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 to support the rest of the group, according to Fitch.

The rating firm said it considers Amlin to be '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.

MSI reported net premiums written of ¥1,697 billion (approximately £9.3 billion) and net income of ¥105 billion (approximately £575 million) in the 12 months ending 31 March 2015.

In the six months ending 30 June 2015, Amlin reported gross written premiums of £2 billion (FY2014: £2.6 billion) and profit before tax of £143 million (FY2014: £259 million).

The key rating trigger that could result in an upgrade of Amlin, according to Fitch, would be an upgrade of MSI's IFS rating. Conversely, a downgrade of MSI's IFS rating would result in a downgrade of Amlin.

Also, evidence of increased integration between Amlin and MS&AD Group could lead to an upgrade of Amlin Plc's IDR and subordinated debt rating, said the firm.

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