Fitch Upgrades Brit Insurance's IFS Rating To 'A+' From 'A'

BIL's strong capital base
September 13, 2004

The upgrade reflects BIL's strong capital base, good reported results and improving market position. Partially offsetting these points is some continued execution risk to the company's ongoing growth strategy.

The agency in December 2002 assigned a Positive Outlook to BIL following the injection of a significant amount of capital in addition to measures taken to improve diversification and reduce the volatility of results. Since December 2002, BIL has secured further capital, substantially changed its business mix and taken steps to expand distribution to include regional business in the UK. These changes have been positive for BIL's rating.

The additional capital enabled BIL to increase premiums by 180% to GBP385m in 2003. The number of underwriters also increased to 121 from eight. Premiums are expected to continue to grow rapidly during 2004 before slowing to around 20% growth in 2005. A portion of the new growth expected over the next two to three years is expected to be derived from new regional distribution outlets, with BIL having already made significant progress towards its target of seven. Fitch's expectation is that BIL will maintain its very strong capital base during this continued growth phase.

BIL's underwriting results in 2003 have been strong with a reported combined ratio of 81.6% although results were aided by the benign loss environment on property catastrophe business and through the quota share arrangement that is in place with the Lloyds operations of the Brit group. The return on equity (based on average capital employed including equalisation reserve) of 11.1% is expected to improve as Brit further increases written premium and fully utilises the capital that it has received.

Fitch believes that despite the rapid growth that has been seen during 2003 and 2004, Brit has maintained good underwriting controls while also improving operational systems to cope with the increased scale of business. The agency expects further progress on the company's initiatives to develop its infrastructure and controls, as BIL's plans continue to be implemented.

BIL's business mix has evolved substantially since 2002 when premiums largely related to property catastrophe reinsurance and financial risks. The diversification has been a deliberate attempt by BIL to reduce the volatility that had been seen in its historical results. In 2003, BIL's gross written premium was accounted for by reinsurance (40%), third party liability (23%), motor (21%), miscellaneous and pecuniary (11%), property (4%) and accident and health (1%).

CONTACT:
Andrew Murray, London, Tel: +44(0)20 7417 4303 / andrew.murray@fitchratings.com

Simone Peakin, London, Tel: +44 (0)20 7862 4126 /
simone.peakin@fitchratings.com

Greg Carter, London, Tel +44 (0)20 7417 6327 /
greg.carter@fitchratings.com

Media Relations: Campbell McIlroy, London, Tel: +44 20 7417 4327.

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Fitch Upgrades Brit Insurance's IFS Rating To 'A+' From 'A'

BIL's strong capital baseSeptember 13, 2004

BIL's strong capital base
September 13, 2004