S&P Affirms Mutual Steam Ship ‘AA-‘ Ratings

January 21, 2002

Standard & Poor’s has affirmed its double-‘A’-minus counterparty credit and insurer financial strength ratings on Bermuda-based insurer The Standard Steamship Owners’ P&I Association (Bermuda) Ltd., commonly designated “SB” or “the club,” with a stable outlook.

It also affirmed double-‘A’-minus insurer financial strength ratings on insurance subsidiaries The Standard Steamship Owners’ P&I Association (Europe) Ltd. and The Standard Steamship Owners’ P&I Association (Asia) Ltd., which are guaranteed by the parent, SB.

“The ratings on SB reflect the club’s very strong capitalization, very strong financial flexibility, strong business position, and strong operating performance in what has remained a difficult environment,” said S&P’s announcement.

It added that, “Offsetting these strengths is the fact that SB has suffered reduced investment returns, and in absolute terms remains a midsize mutual. The outlook on SB reflects the view that underwriting conditions in the protection and indemnity (P&I) market will improve in the next two years, especially for stronger clubs, with call levels increasing.”

S& P further noted that while SB’s total assets of $491 million, and free reserves of $163 million place it in the midsized range, its capital strength will “remain extremely strong, in excess of 2x according to Standard & Poor’s risk-adjusted model.” It also forecast improved operating performance, “with the underwriting result moving toward breakeven in the next three years;”and indicated that “this will be aided by the necessary increase in call rates announced.”

“Business position will remain strong over the next two years, with the club remaining strong in its traditional operations and also benefiting from its joint venture with Tokio Marine & Fire Insurance Co. Ltd. (AA/Watch Neg/–). The club will face ongoing competition from other high quality P&I clubs”, S&P’s report concluded.

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