Fishing specialist is sailing through hard waters
Standard & Poor's said it is revising its outlook on fishing and aquaculture insurer Sunderland Marine Mutual Insurance (SMMI) to positive from stable.
At the same time, Standard & Poor's affirmed its 'BBB+' long-term counterparty credit and insurer financial strength ratings on the company.
The ratings reflect SMMI's strong operating performance, strong capitalization, and good competitive position based on the company's sustained market leadership in its key, albeit niche, business lines.
These positive factors are offset by SMMI's increased investment risk and financial flexibility, which, although adequate, is somewhat constrained by its mutual status.
"We expect that SMMI's stringent underwriting approach will enable the company to maintain profitable underwriting, even in the event of a broad-based deterioration in market conditions," said Standard & Poor's credit analyst Eoin Naughton. The combined ratio at year-end 2007 is expected to be below 97%.
SMMI is expected to defend its dominant position in the fishing segment while continuing to cautiously take advantage of opportunities in the aquaculture and nonfishing sectors as they arise.
Capitalization is expected to strengthen in 2007 as free reserves continue to increase. The capital adequacy ratio will remain supportive of the current rating level.
The ratings are likely to be raised if SMMI can continue to demonstrate the resilience of its competitive position, as evidenced by continued underwriting profitability across the rating horizon.
The outlook would revert to stable, however, if SMMI was unable to sustain its recent underwriting profitability, or if an unforeseen event were to cause a material erosion of its free reserves.
