S&P Upgrades AmWINS Outlook

Standard & Poor's Ratings Services revised its outlook on American Wholesale Insurance Group Inc. (AmWINS) from negative to stable after the company's recently announced initial public offering plans.

"The outlook was revised to stable due to the company's demonstrated ability to maintain margins in the last few quarters," explained Tracy Dolin, S&P's credit analyst. "In addition, AmWINS is committed to redeeming a proportional amount of debt from the proceeds of its planned IPO."

S&P affirmed the "B" counterparty credit and senior debt ratings on AmWINS.

The Charlotte, N.C.-based wholesale insurance brokerage firm first filed its IPO registration statement in November with the Securities and Exchange Commission and has made two additional filings since.

According to the latest filing with the SEC, AmWINS' net income rose 761 percent, or $9.6 million, from $1.2 million to $10.8 million in 2006. Income in 2005 was affected by the payment of $9.8 million to extinguish debt. Revenues grew 30 percent in 2006, or $43 million, from $142 million in 2005 to $185 million.

In a year-to-year comparison, operating income increased 34 percent, or $8.5 million, going from $24.8 million to $33.3 million. Operating income reflects income prior to interest expense, payment of debt, and loss from non-operating income.

S&P said it expects proceeds from the IPO to be used to reduce company debt. In the filing, AmWINS said total debt stands at $167.3 million.

S&P went on to say it would consider revising the outlook to positive once the company establishes a track record of increased margins and lower debt levels.

It cautioned that management may be "distracted from its operating goals" as it deals with running a public company for the first time. There are also challenges to earnings from the soft market. This could lead to a negative rating should margins be seriously affected by earnings.

AmWINS lists Merrill Lynch & Co. and Wachovia Securities as the managers of the IPO. The filing did not include a date for the IPO offering or pricing of the shares.