S&P Raises Bluewater Ratings to ‘BBB’

June 1, 2006

Standard & Poor’s Ratings Services has raised its long-term counterparty credit and insurer financial strength ratings on Oslo-based non-life insurer Bluewater Insurance ASA to “BBB” from “BBB-” and assigned them a stable outlook.

“The upgrade reflects the development of a positive track record by Bluewater’s management team and the company’s strong capitalization,” said S&P. “The ratings also reflect Bluewater’s recent good operating performance and good competitive position.

“These strengths are offset, however, by the potential volatility of future earnings, the small size of Bluewater’s capital base in absolute terms, and the challenges inherent in building a sustainable competitive position in the nonmarine sector.

“The stable outlook reflects Standard & Poor’s expectation that Bluewater’s entry into selected lines of nonmarine business will not undermine the management team’s core competency in marine business.”

S&P further explained: “Operating performance during 2006/2007 may deteriorate slightly, since a repetition of the high level of unrealized investment gains seen in 2005 seems unlikely. The capital adequacy ratio will remain at an extremely strong level, according to Standard & Poor’s risk-based model.

“The competitive position is expected to remain good, with gross premiums written reaching about Norwegian krone (Nkr) 500 million [$82.3 million] in 2006 and more than Nkr600 million [$98.7 million] in 2007.”

“Over the medium term, any significant and sustained deterioration in earnings may cause the ratings to be lowered,” stated S&P credit analyst Peter McClean. “Should Bluewater prove capable of establishing a sustainable competitive position in nonmarine business, however, this may justify a further upgrade.”

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