S&P Raises British Marine Luxembourg Ratings to ‘A’

November 10, 2005

Standard & Poor’s Ratings Services announced that it has raised its long-term counterparty credit and insurer financial strength ratings on Luxembourg-based marine insurer British Marine Luxembourg S.A. (BM) to “A” from “A-.”

S&P also removed the ratings from its CreditWatch, where they had been placed with positive implications on Sept. 27, 2005, and assigned a stable outlook.

“The upgrade reflects the financial and strategic support that BM will receive from being part of the QBE group, following regulatory approval of the acquisition of BM by QBE,” noted S&P credit analyst Lucy Stupples. In a separate announcement, S&P indicated that QBE’s planned reorganization of its European operations would not result in any rating changes (See following article).

S&P also indicated that the “ratings also reflect BM’s very strong capitalization, strong and improved operating performance, and strong competitive position, supported by a conservative investment strategy. Offsetting these strengths is the company’s sole dependence on marine business, which attracts a higher level of industry risk relative to other insurance classes.”

Commenting on the stable outlook, S&P said it “reflects BM’s strong position in the marketplace for small-vessel hull and machinery (H&M) and protection and indemnity (P&I) business. Improvements in operating performance will stabilize over the course of the next two to three years as the company enters a phase of reduced rate increases.

“The combined ratio is expected to remain below 90 percent for the years to February 2006 and 2007. The capital adequacy ratio is expected to remain at a level at least in line with the ratings, although future capital adequacy may decrease through a combination of planned growth and/or profit distributions to QBE. BM will continue to defend and grow its position within its niche market without compromising its strict loss ratio targets for new business acquired. It will continue to provide fixed-premium nonslip P&I and H&M insurance to vessels of less than 10,000 gross tons. Standard & Poor’s expects BM’s current management team to remain in place for at least the rating horizon.”

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