S&P Revises Outlook on Norway’s Bluewater to Positive

May 31, 2005

Standard & Poor’s Ratings Services announced that it has revised its outlook to positive from negative on Norwegian marine insurer Bluewater Insurance ASA, based on an improved view of the company’s competitive position in the global marine hull insurance market.

S&P also affirmed its “BBB-” long-term counterparty credit and insurer financial strength ratings on Bluewater. “The outlook revision reflects Bluewater’s improved competitive position in 2004, with the company achieving a Norwegian market share of more than 14 percent,” stated S&P credit analyst Peter McClean. However, S&P added, “as a relatively new venture, with gross premiums written of Norwegian krone (Nkr) 365 million ($57 million) in 2004, Bluewater remains small relative to its major competitors.”

S&P noted: “The ratings also reflect the company’s strong capitalization, comprehensive reinsurance program, and knowledgeable and experienced management team.

“These strengths are offset by the limited growth potential of future earnings, which are also exposed to possible volatility, and Bluewater’s small size relative to its peers.”

S&P said the upgrade to a positive outlook reflects its “improved view of Bluewater’s competitive position, as well as a slightly improved view of capitalization and underlying technical earnings. An upgrade is dependent on the stability of prospective earnings and the company’s ability to reduce its expense ratio to allow it to cope with the downcycle.

“Operating performance is expected to improve only marginally over the rating horizon, with the combined ratio falling to below 100 percent in 2005 and leveling out in 2006. Capital adequacy is expected to remain comfortably in the ‘AAA’ category. Standard & Poor’s expects Bluewater to consolidate its strengthened competitive position as premium rates start to level out. Gross premiums written are expected to reach about Nkr375 million in 2005, while negative growth is expected in 2006.”

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