Reuters logo
Fitch Rates Elite Insurance IFS 'BBB-'; Outlook Stable
December 14, 2016 / 2:32 PM / 9 months ago

Fitch Rates Elite Insurance IFS 'BBB-'; Outlook Stable

(The following statement was released by the rating agency) LONDON, December 14 (Fitch) Fitch Ratings has assigned Gibraltar-based Elite Insurance Company Limited an Insurer Financial Strength (IFS) rating of 'BBB-' with a Stable Outlook. KEY RATING DRIVERS The rating reflects Elite's adequate capitalisation, strong underwriting performance and conservative investment strategy. The rating is limited by Elite's somewhat weak business profile. According to Fitch's Prism Factor Based Model based on the group's consolidated accounts, Elite's capital score is 'adequate', driven by high business volumes relative to equity. This negative feature is somewhat offset by a conservative investment portfolio. The ratio of net written premiums to equity for the financial year to March 2016 of 2.4x corresponds to Fitch's 'BBB' median guideline. The company's Solvency II coverage ratio of 139% at 31 March 2016 is supportive of the rating. Elite's strong track record of underwriting profitability is positive for the rating. The company reported strong earnings in each of the past five years with a five-year average combined ratio of 88% and a five-year average return on equity of 26%. Profitable underwriting is an important source of earnings for Elite given its limited investment returns. After-the-event (ATE) legal expenses insurance remains Elite's most profitable line of business. At FYE16 it accounted for 66% of underwriting profit but only 27% of net earned premiums. Fitch views Elite's low investment risk strategy as positive for the rating. The company invests primarily in cash and short-term deposits, which accounted for 97% and 99% of the investment portfolio as of 31 March 2016 and 31 March 2015, respectively. Cash and term deposits are held in the UK with seven international banks. However, Elite's exposure to currency mismatch could expose the company to exchange rate volatility. Fitch views Elite's business profile as somewhat weak due to the company's small absolute size and lack of competitiveness in some of the target markets. Historically, ATE legal expenses insurance was Elite's niche core market supported by the company's in-house legal expertise. However, with the UK Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) reforms introduced in 2013, the ATE insurance market has shrunk significantly, causing a material decline in Elite's ATE insurance business. The company started to diversify its insurance portfolio into other general insurance lines in 2009. Fitch views diversification positively for the rating; however, the agency believes that Elite may struggle to expand further in the general insurance space and maintain current profitability given the highly competitive target markets. RATING SENSITIVITIES An upgrade is unlikely unless Elite can demonstrate successful profitable growth of its franchise. The rating could also be upgraded if the Prism FBM capital score sustainably improves to 'Strong', providing that Elite maintains strong underwriting and overall profitability. Weakening of capitalisation as measured by a Prism FBM capital score of 'Somewhat Weak' could lead to a downgrade. The rating could also be downgraded if Elite's underwriting performance deteriorates, with a Fitch-calculated combined ratio of over 100% for a sustained period. Contact: Primary Analyst Ekaterina Ishchenko Associate Director +44 20 3530 1532 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Graham Coutts Director +44 20 3530 1654 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Date of relevant rating committee: 9 December 2016 Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1016458 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below