Moody’s Investors Service has upgraded the corporate family rating and first-lien credit facility ratings of AmWINS Group, Inc. and changed its ratings outlook from positive to stable.
The corporate family rating was changed from B2 to B1, based on the company’s strong credit metrics, while the first-line credit facility ratings moved from B1 to Ba3, and the senior unsecured note rating from Caa1 to B3.
Moody’s said the upgrade reflected AmWINS’ market position as the largest US property & casualty wholesale broker, as well as its diversification across clients, retail producers, insurance carriers and product lines, and healthy EBITDA margins.
AmWINS has also achieved solid organic growth and consistent profitability, the rating agency noted, supported by technology investment, high employee retention, and an opportunistic acquisition strategy.
However, these strengths are offset by the company’s significant debt burden, integration risk associated with acquisitions, and potential liabilities arising from errors and omissions.
Moody’s believes that AmWINS has demonstrated its ability to reduce financial leverage through earnings and free cash flow, and is now managing its leverage in a range consistent with a B1 corporate family rating.
It added that further upgrades to AmWINS ratings are possible if the broker sees continued profitable growth, secures a debt-to-EBITDA ratio below 4.5x, coverage of interest exceeding 3.5x, and free-cash flow-to-debt ratio above 8%.
But analysts also warned of potential downgrades if AmWINS’ debt-to-EBITDA ratio moves above 6x, its coverage of interest below 2.5x, and its free-cash-flow-to-debt ratio below 5%.
Headquartered in Charlotte, North Carolina, AmWINS generated revenues of $1.2 billion for the 12 months through June 2019.
