Reduction in global claims volumes has raised debt leverage

Moody’s has downgraded Cunningham Lindsey’s credit rating from B1 to B2 as it warned a reduction in global claims would hurt its turnover and profitability.

The loss adjuster’s turnover fell by 6% in the year to 31 March, driven by a large decline in global insured claims volume and benign catastrophe losses in the US, one of the company’s largest operating regions.

Lead analyst Enrico Leo said: “The rating downgrade reflects the challenges Cunningham Lindsey has faced from a decline in global insured claims volume over the past year, and low catastrophe losses in the US, leading to a decline in revenue and earnings, higher financial leverage and lower interest coverage.

“The company is taking steps to reduce costs and expand its service offerings, but we regard the projected credit metrics as more consistent with a B2 corporate family rating.”

Moody’s said Cunningham Lindsey’s strong market position in claims management worldwide network could be matched by few competitors.

Its strengths are offset, however, by high financial leverage – which it calculated at eight times earnings before interest, taxation, depreciation and amortisation – and fluctuations in the volume of weather-related claims, which account for a sizable portion of its turnover, it added.