S&P: AmWINS Group LLC Upgraded To 'B+', Holding Company Rated; Outlook Stable
"The rating change reflects our view that AmWINS's continued strong earnings fundamentals and reduced private-equity ownership have resulted in an improving and less-volatile overall credit profile relative to peers'," said S&P Global Ratings credit analyst Neal Freedman. AmWINS's business risk profile reflects its dominant market position as the largest U. S. wholesale broker by revenue, its diversified business segments, and its extensive broker and carrier relationship that fosters stable margins throughout the insurance underwriting cycle, which we assess at the high end of the category. The company continues to demonstrate favorable performance.
We believe AmWINS's credit profile benefits not only from continued earnings momentum but also from the change in ownership structure that occurred in April 2015, resulting in a reduction in private equity ownership to one-third. Although we view AmWINS's leverage as already more conservative than peers', the ownership change gives us additional comfort that the company's credit metrics will remain at these more-conservative levels due to a less-aggressive financial policy.
The stable outlook reflects our expectation that AmWINS will continue to grow its revenue base while maintaining healthy and stable margins and a more-conservative financial policy resulting from the reduced private equity ownership. For 2016, we expect the company to have revenue growth in the mid - to high-single digits, and we expect margins to remain steady at about 30% with a debt-to-EBITDA ratio of 5.0x–5.5x and EBTDA coverage in the 2.5x-3.0x range. We also expect the company's business position to remain on the higher end of fair, and the company to maintain its dominant position as the largest U. S. wholesale broker.
We may lower the current ratings by one notch if AmWINS's earnings or debt levels result in a debt-to-EBITDA ratio consistently greater than 6.0x or coverage consistently below 2.5x. This could occur if the company's earnings were to decline as a result of negative growth or compressed margins, or if the company were to adopt a more-aggressive financial policy.
We may raise the current ratings by one notch if AmWINS continues its earnings growth while maintaining financial leverage consistently under 5.0x and coverage of at least 3.0x. This would likely occur through a less-aggressive financial policy coupled with revenue growth (about 7.5% in the first half of 2016 compared with the previous period) and stable margins (about 30% on an EBITDA basis).