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S&P Affirms Sunderland Marine at BBB+; Outlook Stable

31 May 2000

S&P Affirms Sunderland Marine at BBB+; Outlook Stable

    LONDON--Standard & Poor's--May 31, 2000--Standard & Poor's today affirmed its triple-'B'-plus counterparty credit and insurer financial strength ratings on Sunderland Marine Mutual Insurance Co. Ltd. (SMMI).
    At the same time, Standard & Poor's affirmed its triple-'B'-plus financial strength rating on Sunderland Marine Mutual Insurance Co. Ltd. (New Zealand Branch), a subsidiary of SMMI. The outlook is stable.
    The ratings reflect the company's continued good business position, increased diversification and strong capital. Offsetting these positive factors is the continued marginal operating performance of the company and the poor marine insurance environment.

    Major rating factors:

    -- Good business position. SMMI continues to maintain its strong
    niche position, and has continued to develop its expertise and
    capabilities in its core markets in 1999. SMMI benefits from
    being the market leader in aquaculture and
    single-skipper-owned fishing vessels in the British Isles,
    Australasia, the Netherlands and the U.S. SMMI also enjoys
    excellent customer loyalty, with client retention rates of
    close to 100% in the current difficult market conditions.

    -- Increased geographical spread of business. In 1999, SMMI
    continued to diversify its business mix with its 1998
    acquisition of Tegen Zeegevaar N.V., helping to expand SMMI's
    European presence. In addition, there was strong growth in the
    aquaculture account in 1999, leading to an increased
    proportion of business from South America. The U.K. remains
    the largest market for SMMI, accounting for 32% of gross
    premiums in 1999, with continental Europe accounting for 17%,
    and the U.S. for 18%. Standard & Poor's believes that this
    diversification leaves SMMI less exposed to difficult
    operating conditions in any one region.

    -- Capital strength. Capital remains strong when measured on a
    risk-adjusted basis, covering Standard & Poor's capital
    adequacy model requirements by 1.3 times. The capital base has
    continued to grow, and at year-end 1999 was GBP25 million
    (US$37.5 million).

    -- Operating performance. SMMI's operating performance has
    continued to be marginal in 1999, with the soft market
    conditions continuing to impact earnings. SMMI has been
    sheltered, to some extent, from the worst rate falls seen in
    the hull market by its niche position. However, the company
    has seen a continuation of the difficult operating environment
    facing marine insurers. SMMI has improved its operating
    performance in 1999, with the combined ratio for the year
    falling to 105.9% from 109.2% in 1998.

    OUTLOOK: STABLE

    Standard & Poor's expects that during 2000, operating performance will gradually improve, with the underwriting result moving toward breakeven in the medium term. SMMI will continue to seek to grow and diversify its business position, which will remain good going forward. Capital will remain strong in 2000, remaining at least within the single-'A' range as measured on a risk-adjusted basis, Standard & Poor's said.--CreditWire