Best Affirms Steamship Mutual Underwriting (Bermuda) Rating

March 27, 2006

A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) and assigned an issuer credit rating of “a-” to The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship or the Club). The outlook for both ratings is stable.

“The rating reflects the Club’s strong risk-adjusted capitalization and well diversified portfolio of risks,” said Best. “A partially offsetting factor is the continuing challenge the Club faces in achieving underwriting profitability.” The rating agency noted that it based its analysis on the “combined figures for Steamship and The Steamship Mutual Trust.”

Best said it “believes Steamship is likely to consolidate its excellent risk-adjusted capitalization in 2006-2007 through retention of surplus. As part of a long term review of its membership, Steamship has ceased underwriting several accounts in recent years, which has improved its risk profile. ” As a result Best expects this will ” enhance the Club’s future performance, allowing greater retention of surplus (anticipated retained surplus for the year ending February 2006 of USD 5.5 million). The Club’s financial strength is further enhanced by its status as a mutual, giving it the flexibility to make additional calls on its members should the need arise.”

Best also “anticipates an improvement in Steamship’s performance in the financial years ending February 2006 and 2007, driven mainly by an improvement in underwriting results following the review of its membership and a reduction in management expenses resulting from internal restructuring. This should produce a combined ratio of just over 100 percent at year-end February 2006 and a similar result the following year. “Additionally, future investment performance is likely to reduce in volatility due to a decline in the use of alternative investments (mainly hedge funds), the results of which have been subject to fluctuations. Steamship continues to benefit from a well diversified portfolio of risks by vessel type, age and territorial ownership.”

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