A M Best's affirms A-Rating of Brit Insurance Limited

OLDWICK, N.J., Sept. 21, 2001-A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) for BRIT Insurance Limited, London. The rating is based on the company's excellent capitalisation and liquidity levels, good underlying ...
October 4,2001


OLDWICK, N.J., Sept. 21, 2001-A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) for BRIT Insurance Limited, London. The rating is based on the company's excellent capitalisation and liquidity levels, good underlying operating performance, improving business position and the strength of its management and underwriting teams. Offsetting factors include BRIT's modest market profile, low level of diversification and the short operating history under the current business plan.
It is too early to accurately predict the impact of the catastrophic events of September 11 in the United States, but A.M. Best believes after discussions with the company's senior management that BRIT is in a position to withstand its projected losses. In A.M. Best's opinion, BRIT's projections are based on conservative and detailed assumptions.
Excellent capitalisation - The A.M. Best risk-based capital model incorporates factors such as the company's exposure to high-risk lines, high dependency on reinsurance and lack of diversification. At year-end 2000, total assets of GBP 169.8 million and shareholders' funds (adjusted for equalisation provisions) of GBP 59.9 million supported a low volume of earned premium (GBP 18.9 million). In March 2001, BRIT's capital base was boosted by a GBP 20 million capital injection from its parent, BRIT Insurance Holdings PLC.
Excellent liquidity - BRIT maintains minimal exposure to equity markets (1.3% of current invested assets), with the majority of its investments held in cash and cash equivalents. A.M. Best believes that BRIT holds sufficient liquid assets to meet its anticipated gross liabilities as they become due.
Good underlying operating performance - In 2000, BRIT managed to restore profitability (GBP 6.2 million profit before tax) with the benefit of significant recoveries from its reinsurance programme. Going forward, A.M. Best expects BRIT's profitability to be less dependent on reinsurance protection. In A.M. Best's opinion, it is highly likely that BRIT will report a loss after tax for 2001.
Improving business position and diversification - BRIT remains largely reliant on two main business lines - catastrophe and financial risks. However, management continues to focus on implementing its strategic diversification plan-in operation since late 1998 which has led to the establishment of the financial risks business line, an increased spread in catastrophe treaty business, a motor quota share of Wren syndicate 1202 and a new account planned for 2002. BRIT benefits from an experienced catastrophe treaty underwriting team-recruited in late 2000 which is implementing a new approach to the company's underwriting of this class, writing a mix of mainly non-marine retrocession, reinsurance and industry loss warranty business.
Strong management team - A.M. Best believes BRIT benefits from the management team's considerable knowledge and experience of the business lines written. Standards of management information and control procedures in all aspects of the business are high.
Expectations:

Management will remain committed to maintaining the company's excellent level of capitalisation as measured on a risk-based capital basis.
A.M. Best regards the assumptions underlying the new reinsurance/retrocession business plan (implemented from late 2000 onward) as reasonable and is confident in BRIT's ability to build on the first year of this new business plan. However, as this represents a substantially new book of business to the company, A.M. Best's ongoing rating review will include a regular appraisal of BRIT's success in continuing to achieve the targets for premium growth, spread of risk, premium rates and management of aggregates in this business line.
A.M. Best believes that the company will benefit will benefit significantly from expected drastic rate increases in the forthcoming renewal season as all of its inward contracts are for periods of no longer than months. Furthermore, the impact of hardening rates on its outward reinsurance purchasing will be partly mitigated by the long-term nature of several of the current outward protections.
In the absence of further extraordinary catastrophic events, A.M. Best expects the company to return to profitability in 2002 and 2003, benefiting from hardening of the rating environment in catastrophe treaty business, which should also assist BRIT in its plan to achieve further significant growth in overall business volume in the next three years. A.M. Best will closely monitor the development of BRIT's exposure to losses from the U.S. terrorist attacks.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.
CONTACTS:
Public Relations
Jim Peavy
(908) 439-2200, ext. 5644
peavyj@ambest.com
Analysts
Jose Sanchez-Crespo
(44) 20 7626 6264
sanchej@ambest.com
Alison Stringer
stringa@ambest.com
 
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