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| S&P Affirms Zurich Specialties London Ratings; Outlook Stable |
LONDON, March 25 /PRNewswire/ -- Standard & Poor's said today it affirmed
its single-'A'-plus counterparty credit and insurer financial strength ratings
on U.K.-based commercial lines insurer Zurich Specialties London Ltd. (ZSL), a
wholly owned subsidiary of Zurich Financial Services (ZFS, whose main
operating subsidiaries are rated AA-/Stable/--). The affirmation follows
Standard & Poor's review of ZSL's operations and 2001 financial performance.
The outlook is stable.
"The ratings on ZSL are based on the company's continued strategic
importance to ZFS, strong capitalization, good overall operating performance,
and good business position," said Stephen Searby, a director at Standard &
Poor's Insurance Ratings Group in London. These factors are partly offset by
high outward use of reinsurance, reliance on investment earnings from surplus
capital to produce bottom-line profits, and continuing involvement in a number
of commoditized London Market business lines.
ZSL benefits from the ZFS group name and continues to have key common
clients. In addition, the majority of its reinsurance capacity is from
affiliates of ZFS. Underlining its commitment to ZSL, ZFS has provided new
three-year aggregate excess reinsurance cover for the financial years 2002-
2004, including any adverse development on underwriting years 1999-2001, with
reinstatement options.
Although ZSL's capitalization is extremely strong on a risk-adjusted
basis, with a forecast capital adequacy ratio of more than 180% at Dec. 31,
2001, this is partly a function of ZSL's very high use of reinsurance. In
2002, capital adequacy is expected to fall slightly due to growth and dividend
payments, but is expected to remain in line with the rating category.
ZSL has a good business position in its chosen niches in the London
Market, including liability and surplus lines. This is partly offset, however,
by the company's continuing reliance on a number of commodity London Market
lines in which it has relatively small shares, and which therefore bring
little in the way of competitive advantage.
Underwriting results have been marginal over the past few years, although
the sizable capital base generates significant investment income, which
underpins the operating performance. "For 2002, rates are improving across
nearly all the lines of business that ZSL writes, and operating performance
will therefore improve sharply in 2002, with a combined ratio of 110%-115% and
an ROR of 15% expected," added Mr. Searby. "In addition, ZSL's capital
adequacy is expected to remain at or above 150% according to Standard & Poor's
capital model, a level consistent with the single-'A'-plus rating on ZSL."
A complete list of rating actions is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis system, at
http://www.ratingsdirect.com. They are also available on Standard & Poor's public Web
site at http://www.standardandpoors.com; under Rating Actions, select Newly Released
Ratings Listings. Alternatively, call the Standard & Poor's Ratings Desk in
London at (44) 20-7847-7400.
ANALYTICAL E-MAIL ADDRESSES
stephen_searby@standardandpoors.com
christian_dinesen@standardandpoors.com
InsuranceInteractive_Europe@standardandpoors.com
SOURCE Standard & Poor's
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CONTACT:
Stephen Searby, +44-20-7847-7053, Christian
Dinesen, +44-20-7847-7043, both of Standard & Poor's
