Independent Insurance's future is seen as rosy, despite Michael Bright's headline-grabbing departure as chief executive.

Industry experts predict that the company is well placed to take advantage of the underwriting cycle's upturn and unlikely to be the subject of a hostile takeover, despite its diminished share price.

Standard & Poor's reaffirmed its single A rating. It said Independent would remain on credit watch, with negative implications. However, its rating was based on the fact that “notwithstanding the press speculation and Michael Bright's resignation, Independent's board remains committed to addressing capital pressures likely to be caused by the expected 2001 business growth”.

AM Best dropped Independent's rating from A (excellent) with negative implications to A- (excellent) with developing implications. Best acknowledged that Independent had taken action to mitigate its 2000 results problems and was likely to continue benefiting from positive market conditions.

“However, without a capital-raising exercise in the near term, the company's current capital adequacy will deteriorate… given the anticipated underwriting growth,” it said.

ING Barings Charterhouse Securities analyst Barrie Cornes agreed Independent needed access to more capital because “it wants to continue top-line growth, which it should do because of the upturn in the underwriting cycle.

“It's geared up in terms of people, reinsurance and administration.”

He said that, although Bright personified the company, Independent had a strong management team.

“Garth Ramsay is a very, very able man, very impressive,” he said.

Cornes said Independent's reinsurance deals indicated the reinsurers were confident Independent would not need to use the full £248m.

He said the decision to charge over its property was probably due to its size. “Unlike its large competitors that don't publish independent confirmation of adequacy of their reserves, its position is highly transparent.”

Cornes also said a hostile takeover was unlikely because it would not get the support of management and staff, who were tied into the company's profits through share deals, though he did not rule out a strategic merger.

Fitch IBCA insurance director Chris Waterman agreed that Independent's management would survive Bright's step down. “It was a very visible leadership but he surrounded himself with a strong management team and there's significant strength there,” he said.

Waterman said Bright's step down wouldn't trigger a takeover. “The key issue is share price and clearly that makes the company more attractive but Mr Bright's move alone won't do that.”

  • Read the first face-to-face interview with Independent executive chairman Garth Ramsay on page 4.

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