S&P Affirms Underwriters Guarantee Ins Co 'Bpi' FSR

    NEW YORK--Standard & Poor's--April 13, 2001-- Standard & Poor's today affirmed its single-'Bpi' financial strength rating on Underwriters Guarantee Insurance Co. (UGIC).
    The rating is based on limited product line and geographic diversification, weak operating performance, volatile reserve development, and an aggressive investment profile, somewhat offset by adequate capitalization.
    Major Rating Factors:
    -- The company's business scope is considered limited as a result of its product line and geographic concentration. Surplus stood at $5.9 million at year-end 1999, and total 1999 net premiums written amounted to $9.4 million. Currently, 98.7% of net premiums written are in Florida. The company is susceptible, on a gross basis, to catastrophes and storm-related losses.
    -- Operating performance has been weak, with a five-year average ROR of negative 3.2%.
    -- The company's two-year reserve development ratio has been volatile, averaging 10.6% since 1995. The reported ratios have ranged from 17.3% redundant (negative development) to 38.5% deficient in the last five years.
    -- More than 28% of the company's invested assets are invested in interest-rate sensitive collateralized mortgage obligations and loan-backed bonds. In 1999, more than 29% of surplus was invested in unaffiliated common stocks.
    -- Capitalization, as indicated by Standard & Poor's capital adequacy model, was appropriate for the rating level at year-end 1999. However, the NAIC risk-based capital ratio is below the industry median at 190.2%. In addition, the company has about $2 million in surplus notes that comprise 34% of surplus as of year-end 1999.
    Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.
    Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. ---CreditWire.