Fitch Ratings has affirmed the A financial strength rating of Brit Insurance. The rating outlook remains positive.
Fitch said: "The rating and outlook reflect the company's enhanced capital base and the increased diversification that now exists following the restructuring of underwriting within Brit Insurance Holdings. The rating and outlook also reflects the strong profitability for Brit in 2002 as well as the insurer's potential for profitable expansion in the current market conditions."
In 2002, BIH raised an additional £204.2 million (before expenses), increasing capital and surplus to £476m at the year end. This capital raising at the group level resulted in the second capital injection in 18 months for Brit, as its share capital was raised by a further £80m to reach £150m at year end 2002 and shareholders' funds increased to £179m. The capital base has been supplemented further as a result of the acquisition of PRI.
The acquisition of PRI in an all share deal has supplemented the level of capital available to Brit in addition to giving the company access to experienced liability underwriters. Fitch had commented at the time of the acquisition announcement that the transaction would not have an effect on Brit's ratings. At the end of 2002 PRI had GBP123m of share capital but had written only GBP16m of net premium since its first policies incepted in September 2002. The result of this acquisition is that shareholders' funds available to Brit are now in excess of £300m. In addition to giving Brit access to further unencumbered capital the purchase has moved the group towards its aim of improved diversification of risks.
During 2002 Brit's underwriting portfolio consisted largely of catastrophe retrocession protection and financial risks. Towards the end of the year, business was transferred from the Lloyd's operations to Brit through a quota-share arrangement with the intention that the business would be renewed within Brit for 2003. This strategy, together with the hiring of additional teams of underwriters, will allow Brit to make use of the additional business licences that it obtained in 2002. By diversifying the lines of business that it writes, Fitch expects Brit to produce considerably more stable results than it has in the past.
The business mix for 2003 is expected to move towards employer's liability (16%), motor/fleet (14%), property (12%), catastrophe retrocession (9%), professional indemnity (8%), legal expenses (6%) and quota share business equating to a further 25% of the 2003 portfolio.
