OREANDA-NEWS. Fitch Ratings has assigned Hiscox Ltd's (Hiscox) GPB275m issue of fixed- to floating-rate callable subordinated notes a final 'BBB-' rating.

The assignment of the final rating follows the completion of the bond issue and receipt of documents conforming to the information previously received. The final rating is the same as the expected rating assigned on 6 November 2015. The proceeds of the subordinated notes are being used for general corporate purposes.

KEY RATING DRIVERS
Hiscox, the holding company for the Hiscox group registered and domiciled in Bermuda, has issued subordinated fixed- to floating-rate notes due in 2045. As a result, Hiscox's financial leverage ratio (FLR) increased to 15.9% from zero based on a pro-forma calculation using 2014 financials. The securities pay a fixed coupon of 6.125% annually until 2025 and thereafter a floating rate of interest equal to 3-month LIBOR plus 5.076%, payable quarterly.

The new subordinated bond qualifies as Tier II regulatory capital with mandatory deferral triggers referencing a solvency capital event. According to Fitch's methodology, the bond is classified as 100% capital due to regulatory override within Fitch's risk-based capital calculation and is classified as 100% debt for the agency's financial leverage calculations.

The notes are rated three notches below Hiscox's Issuer Default Rating (IDR) of 'A-'. This reflects a 'Poor' recovery assumption (two notches) and 'Moderate' risk of non-performance (one notch).

RATING SENSITIVITIES
A change to Hiscox's IDR is likely to result in a corresponding change of the subordinated debt rating.

Related rating committee date: 6 November 2015.