S&P Affirms Mutual Steamship (Bermuda) ‘A’ Rating

February 2, 2005

Standard & Poor’s Ratings Services announced that it has affirmed its “A” long-term counterparty credit and insurer financial strength ratings on Bermuda-based insurer The United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Ltd. (the U.K. Club or the club), with a stable outlook.

“The ratings reflect the club’s very strong financial flexibility (defined as the ability to source capital relative to requirements), strong capitalization, and strong niche competitive position,” S&P said. However it also noted that “these positive factors are partially offset by the high industry risk associated with protection and indemnity business, and an investment policy considered aggressive in relation to that of the club’s peers and the non-life insurance sector generally.”

S&P credit analyst Peter McClean indicated: “The stable outlook is based on Standard & Poor’s expectation of improvements in the club’s operating performance in 2005 and beyond as a result of a series of rate increases initiated since the year ended Feb. 20, 2002.”

S&P said it “expects the club to record a marginal deficit in the year ending Feb. 20, 2005. A substantial improvement in underwriting is expected, however, with a combined ratio of about 113 percent in the same year. Capitalization, as measured by Standard & Poor’s risk-based model, is expected to fall slightly following a slight decrease in the level of free reserves, but should remain in the ‘A’ (strong) range at year-end February 2005.

“No significant improvement in capitalization is expected until 2007. Competitive position is expected to remain strong, with the club continuing to insure about 20 percent of the world’s oceangoing tonnage, despite competition from other members of the International Group of Protection & Indemnity Clubs.”

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