S&P Raises Norway’s SKULD to ‘A-‘

June 21, 2007

Standard & Poor’s Ratings Services has raised its long-term counterparty credit and insurer financial strength ratings on Oslo-based marine insurer Assuranceforeningen SKULD (Gjensidig) (Skuld or the club) to “A-” from “BBB+” and assigned the ratings a stable outlook.

“The upgrade reflects Skuld’s continued strong operating performance,” stated S&P credit analyst Peter McClean. The ratings also reflect the club’s strong competitive position and strong financial flexibility.

However, S&P also noted that the “club’s high level of investment risk and strategic setback caused by the failed merger with Sveriges Angfartygs Assurans Forening (The Swedish Club) (BBB/Stable/–) at the end of 2006,” should be considered as offsetting factors.

McClean said the “stable outlook reflects Skuld’s strengthening capitalization and continuing strong operating performance. We expect the club to sustain its strong operating performance, but with some volatility driven by occasional costly claims–either from Skuld’s members or other clubs within the International Group of Protection and Indemnity Clubs–and volatility in financial performance.”

S&P also expects the club’s combined ratio to stay below 100 percent in the medium term, while its “gross premium calls are expected to increase by about 10 percent at year-end Feb. 20, 2008, and be derived largely from organic growth.”

Exposure to equity investments, measured as a percentage of free reserves, is expected to remain below the average for the International Group of Protection and Indemnity Clubs (IG) of about 110 percent.

In conclusion S&P said a “positive rating action is regarded as unlikely in the medium term,” moreover “any significant deterioration in Skuld’s capitalization and/or operating performance could lead to a negative rating action.”

S&P noted that the “IG is a group of mutual organizations that insures approximately 90 percent of the world’s shipping for third-party liability. Like other protection and indemnity clubs, Skuld focuses on the service it provides to its members.”

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