OREANDA-NEWS. Fitch Ratings believes Hastings Insurance Group (Finance) plc's (Hastings; B+/Stable) execution of a successful IPO would be a positive development for the insurer's credit profile, as the company plans to use proceeds to reduce leverage on its balance sheet.

The company expects to issue new shares to raise approximately GBP180m in gross proceeds and sell a proportion of existing shares. The proceeds will be used to redeem a portion of the outstanding GBP266.5m senior secured fixed rate notes due 2020. The company anticipates using new bank facilities to redeem the remainder of the notes later in the year. Hastings reported net debt of GBP364.6m at 1H15.

Hastings is a Gibraltar-based motor insurance underwriter and broker operating in the UK market. At HY15, the company held a 5.5% market share of the UK motor market. Hastings continues to underwrite profitably in a highly competitive and challenging operating environment, reflected in a reported combined ratio of 90% for 1H15 (1H14: 90.4%).

Fitch believes that Hastings' agile business model, low expense base and use of extensive driver profile data provide it with a competitive advantage over larger, more established players. However, there is the risk of a competitor replicating this model within three to five years, which could put Hastings' current growth trajectory at risk.