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Rating Action Commentary


FITCH UPGRADES UTMOST GROUP PLC'S IDR TO 'A-'; AFFIRMS IFS RATINGS; OUTLOOK
STABLE

Thu 30 Jun, 2022 - 10:03 AM ET



Fitch Ratings - London - 30 Jun 2022: Fitch Ratings has upgraded Utmost Group
plc's (Utmost Group) Long-Term Issuer Default Rating (IDR) to 'A-' from 'BBB+'.

The agency simultaneously affirmed Utmost PanEurope dac, Utmost Limited, Utmost
Worldwide Limited, Quilter International Ireland dac and Quilter International
Isle of Man Limited at Insurer Financial Strength (IFS) Ratings at 'A' (Strong).

The Outlooks are Stable.

A full list of rating actions is provided below.


KEY RATING DRIVERS

The upgrade of the group holding company's IDR reflects our view that the
insurance regulatory bodies that supervise Utmost Group's operating companies
will likely strengthen their cooperation with the Prudential Regulatory
Authority (PRA), which is Utmost Group's group lead regulator. As a result, we
now rate Utmost Group's IDR at 'A-', which is at the same level as the implied
IDR of its insurance operating subsidiaries. The Utmost Group has been subject
to group supervision by the PRA since 2020.

Fitch has also revised the Isle of Man's regulatory classification to group
solvency from ringfencing for life insurance groups. As a consequence, more than
80% of Utmost Group's consolidated capital now falls within jurisdictions that
are expected to follow group solvency form of regulation. This underpins the
narrow notching between the IDRs of Utmost Group and its operating subsidiaries.

The affirmation of IFS Ratings reflects Utmost Group's strong capitalisation and
leverage, strong and improving business profile and good financial performance,
which we expect to strengthen.

Utmost Group's business profile is 'Moderate' compared with other UK life
insurance groups'. This reflects its favourable competitive positioning, as well
as moderate business risk profile and diversification.

The group has a leading business franchise in the international life and savings
market, and is the market leader in this segment based on assets under
administration. The acquisition of Quilter International in November 2021 has
helped the group to improve its operating scale and extend its market
leadership. Utmost Life and Pensions, which acquires closed life insurance books
in the UK has a moderate competitive position in the UK life insurance market.

Fitch believes that Utmost Group is exposed to some execution risks in
integrating acquired businesses, but these risks are mitigated by the group's
experience in managing similar risks.

Utmost Group's capitalisation and leverage is strong, supported by an 'Extremely
Strong' Prism Factor-Based Capital Model (Prism FBM) score and a strong group
Solvency II (S2) solvency capital requirement (SCR) ratio of 177% at end-2021
(2020: 183%).

Financial leverage ratio (FLR) was very strong at 20% at end-2021 (2020: 24%).
The improvement of FLR in 2021 followed an increase in the group's capital base
as a result of the Quilter International acquisition. FLR further improved in
January 2022 as the group issued GBP300 million restricted Tier 1 (RT1) notes
but this is offset by the payment of GBP290 million as dividend to the group's
parent company, Utmost Holdings (Guernsey) Limited, immediately after the RT1
issue.

Fitch expects dividend payments and amortisation of acquired value of in-force
(ViF) business to constrain the growth in IFRS equity and to result in a gradual
weakening in the group's FLR from current levels.

Utmost Group's Fitch-calculated operating return on equity (OROE) was 14% in
2021 (2020: 10%). We expect the group to continue to report strong operating
earnings, which will be supported by contributions from the recently acquired
Quilter International business. However, Fitch expects the group's net income to
remain volatile and weaken over the next two years, due mainly to the
amortisation of the acquired ViF. In 2021, the group's net income return on
equity was exceptionally strong at 32% (2020: 10%), helped by gains from bargain
purchases of acquired businesses. We do not see this result as sustainable.

The group's Fitch-calculated fixed-charge coverage (FCC) was unchanged in 2021
at a strong 8x. Fitch expects Utmost Group's FCC to reduce following the full
account of interest expenses on the Tier 2 and RT1 notes issued in September
2021 and January 2022, respectively, although the reduction will be partly
offset by strong operating earnings.


RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating
action/upgrade:

--A successful integration of acquired businesses, as evident in maintaining a
Fitch-calculated OROE above 12%, an 'Extremely Strong' Prism FBM score and FLR
below 25% on a sustained basis

Factors that could, individually or collectively, lead to negative rating
action/downgrade:

--Significant difficulties in integrating the acquired businesses, resulting in
a material financial impact

--A sustained weakening in the run-rate of FCC to below 4x

--The group's S2 ratio declining to 130% or FLR exceeding 30%

--A weakened business profile manifested in a significant reduction in assets
under management


BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Financial Institutions and Covered Bond
issuers have a best-case rating upgrade scenario (defined as the 99th percentile
of rating transitions, measured in a positive direction) of three notches over a
three-year rating horizon; and a worst-case rating downgrade scenario (defined
as the 99th percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and worst-case
scenario credit ratings for all rating categories ranges from 'AAA' to 'D'.
Best- and worst-case scenario credit ratings are based on historical
performance. For more information about the methodology used to determine
sector-specific best- and worst-case scenario credit ratings, visit
https://www.fitchratings.com/site/re/10111579


REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the
Applicable Criteria.


ESG CONSIDERATIONS

Unless otherwise disclosed in this section, the highest level of ESG credit
relevance is a score of '3'. This means ESG issues are credit-neutral or have
only a minimal credit impact on the entity, either due to their nature or the
way in which they are being managed by the entity. For more information on
Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

RATING ACTIONS

Entity / Debt  

Rating  

Prior  


Quilter International Ireland dac
Ins Fin Str
A 
Affirmed
A 
Utmost PanEurope dac
Ins Fin Str
A 
Affirmed
A 
Utmost Worldwide Limited
Ins Fin Str
A 
Affirmed
A 
Quilter International Isle of Man Limited
Ins Fin Str
A 
Affirmed
A 
Utmost Limited
Ins Fin Str
A 
Affirmed
A 
Utmost Group plc
LT IDR
A- 
Upgrade
BBB+ 
 * subordinated

LT
BBB- 
Upgrade
BB+ 
 * junior subordinated

LT
BB+ 
Upgrade
BB 
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VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com


PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one
or more of the transaction parties participated in the rating process except
that the following issuer(s), if any, did not participate in the rating process,
or provide additional information, beyond the issuer’s available public
disclosure.


APPLICABLE CRITERIA

 * Insurance Rating Criteria — Effective Nov. 26, 2021–July 15, 2022 (pub. 26
   Nov 2021) (including rating assumption sensitivity)





APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to
criteria providing description of model(s).

Prism Factor-Based Capital Model, v1.7.2 (1)


ADDITIONAL DISCLOSURES

 * Dodd-Frank Rating Information Disclosure Form
 * Solicitation Status
 * Endorsement Policy


ENDORSEMENT STATUS

Quilter International Ireland dac UK Issued, EU Endorsed Quilter International
Isle of Man Limited UK Issued, EU Endorsed Utmost Group plc UK Issued, EU
Endorsed Utmost Limited UK Issued, EU Endorsed Utmost PanEurope dac UK Issued,
EU Endorsed Utmost Worldwide Limited UK Issued, EU Endorsed


DISCLAIMER & DISCLOSURES

All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and
disclaimers. Please read these limitations and disclaimers by following this
link: https://www.fitchratings.com/understandingcreditratings. In addition, the
following

Read More


SOLICITATION STATUS

The ratings above were solicited and assigned or maintained by Fitch at the
request of the rated entity/issuer or a related third party. Any exceptions
follow below.


ENDORSEMENT POLICY

Fitch’s international credit ratings produced outside the EU or the UK, as the
case may be, are endorsed for use by regulated entities within the EU or the UK,
respectively, for regulatory purposes, pursuant to the terms of the EU CRA
Regulation or the UK Credit Rating Agencies (Amendment etc.) (EU Exit)
Regulations 2019, as the case may be. Fitch’s approach to endorsement in the EU
and the UK can be found on Fitch’s Regulatory Affairs page on Fitch’s website.
The endorsement status of international credit ratings is provided within the
entity summary page for each rated entity and in the transaction detail pages
for structured finance transactions on the Fitch website. These disclosures are
updated on a daily basis.

Insurance
Europe
Isle of Man
Ireland
Guernsey
United Kingdom


ENTITIES

 * Quilter International Ireland dac
 * Utmost Limited
 * Quilter International Isle of Man Limited
 * Utmost PanEurope dac
 * Utmost Worldwide Limited
 * Utmost Group plc





ISSUER CONTENT

 * Fitch Withdraws Utmost Limited's IFS Rating
 * Fitch Withdraws Quilter International Ireland's IFS Rating
 * Utmost Group plc
 * European Wealth Managers - Peer Review July 2022
 * Utmost Group plc - Ratings Navigator
 * Fitch Rates Utmost Group plc's Proposed Subordinated Restricted Tier 1 Notes'
   'BB'
 * Fitch Rates Quilter International Isle of Man and Quilter International
   Ireland at IFS 'A'
 * Fitch Rates Utmost Group's Proposed Subordinated Tier 2 Notes 'BB+'
 * Utmost Group plc and Operating Subsidiaries forming Utmost International





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FITCH RATINGS ANALYSTS

Rishikesh Sivakumar, CFA
Associate Director
Primary Rating Analyst
+44 20 3530 2565
rishikesh.sivakumar@fitchratings.com
Fitch Ratings Ltd
30 North Colonnade, Canary Wharf London E14 5GN

Fedor Smolyakov, PhD, PRM
Director
Secondary Rating Analyst
+44 20 3530 1306
fedor.smolyakov@fitchratings.com


Federico Faccio
Senior Director
Committee Chairperson
+44 20 3530 1394
federico.faccio@fitchratings.com



MEDIA CONTACTS

Athos Larkou
London
+44 20 3530 1549
athos.larkou@thefitchgroup.com

RATINGS KEYOUTLOOKWATCHPositiveNegativeEvolvingStable 

* Long Term/Short Term Issuer Default Rating displayed in orangedenotes EU or UK
Unsolicited and Non-Participatory Ratings



Where there was a review with no rating actio (Review – No Action), please refer
to the “Latest Rating Action Commentary” for an explanation of key rating
drivers



*Premium contentis displayed in Fitch Red



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