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| S&P Affirms Zurich Specialties London 'A+' Ratings |
LONDON, Aug. 30 /PRNewswire/ -- Standard & Poor's today affirmed its
single-'A'-plus counterparty credit and insurer financial strength ratings on
Zurich Specialties London Ltd. (ZSL), based on ZSL's good stand-alone profile
and its strategic importance to Switzerland-based Zurich Insurance Co.
(AA+/Negative/A-1+). The outlook is stable. ZSL's stand-alone profile is
supported by the company's strong capitalization, strong operating
performance, and good business position. Offsetting these factors are the
weak, although improving, premium rates in the company's chosen markets, as
well as some key person dependency.
Major rating factors:
-- Strategic importance to the Zurich group. The company is a wholly
owned subsidiary of the Zurich Group and benefits from the group name,
as well as underwriting support and capacity of various group entities.
Current and future product lines are a combination of property/casualty
and alternative risk transfer insurance that the Zurich Group considers
core, both in terms of the client base and the nature of the
transactions.
-- Very strong capitalization on a risk-adjusted basis. Capital adequacy
is, however, expected to reduce to a strong level from its extremely
strong level of 187% in 2000, due to growth and dividend payments.
Uncertainty over reserving before 1999 was removed in 1998 following
the purchase of a stop-loss contract with Zurich International
(Bermuda) Ltd. (AA+/Negative/--), which provides an additional $200
million of comfort. Capitalization is expected to remain at least in
line with the rating, and ZSL retains capacity to generate future
retained earnings through the suspension of dividend and interest
payments.
-- Strong operating performance currently and prospectively. The sizable
capital base generates significant investment income, which underpins
the operating performance. This is required due to the weak pricing in
most of ZSL's markets and the high, although reducing, expense base
from before the discontinuation of the reinsurance business.
-- Good business position in its chosen niches in the London market,
including liability and surplus lines. This is derived from the
strength and resilience of ZSL's client relationships and the company's
ability to leverage the expertise and capacity of group companies.
-- Continuing weak premium levels in key markets, although these are
flattening and show some signs of improvement. The company's expertise
is in specialized property and casualty lines, where it focuses on risk
selection rather than market domination. It will remain an
opportunistic writer, increasingly specializing in nonstandard risks.
-- Some key person dependency. The niche position of the company means
that accounts could be threatened if key underwriters leave, although
this is somewhat mitigated by group support.
OUTLOOK: STABLE
Capital is expected to remain securely at the 'A' rating level, with the
capital adequacy exceeding 135% according to Standard & Poor's model.
Operating performance is expected to remain consistent with the rating
category. The current company structure and role performed by ZSL in the
Zurich group and its London market operation will stabilize and increase in
importance to the group.
SOURCE Standard & Poor's
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CONTACT:
Christian Dinesen, 44-20-7847-7043, or
Stephen Searby, 44-20-7847-7053, both of Standard & Poor's,
London
