Best Sees No Ratings Changes for Fairfax from Brit Acquistion

A.M. Best has commented that the issuer credit rating (ICR) of “bbb” and the unsecured debt and preferred equity ratings of Fairfax Financial Holdings Limited are unchanged following the announcement that Fairfax is expanding its global presence by acquiring Brit PLC for $1.88 billion.

The closing is expected to take place before the third quarter of 2015, and is subject to regulatory approvals and other customary closing conditions. Best added that all of the “other ratings of Fairfax’s insurance subsidiaries are expected to remain unchanged.

“Fairfax’s financial leverage position and the group’s risk-adjusted capital position are expected to deteriorate moderately but remain supportive in line with Best’s expectations for the current ratings.”

Best said the “execution risk of this transaction is mitigated given Fairfax’s decentralized operating strategy and the group’s track record of raising capital. The transaction does add a significant amount of intangible capital to the group’s balance sheet and moves their debt to tangible capital to the high end of the acceptable range.”

Best added that it would “continue to monitor the group’s financial position as Fairfax works to complete its financing needs, for which it has various viable financing options. Any material changes from the options suggested in the transaction’s structure will be reviewed to determine the impact to the financial position of Fairfax.”

Source: A.M. Best