A.M. Best Lowers Rating of Steamship Mutual.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 13, 2002 A.M. Best Co. has lowered the financial strength rating to A- (Excellent) from A (Excellent) of The Steamship steamship, watercraft propelled by a steam engine or a steam turbine. Early Steam-powered Ships Marquis Claude de Jouffroy d'Abbans is generally credited with the first experimentally successful application of steam power to navigation; in 1783 his Mutual Underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. Association (Bermuda Bermuda (bûrmy  `də), British dependency (2005 est. pop. 65,400), 21 sq mi (53 sq km), comprising some 150 coral rocks, islets, and islands (of which some 20 are inhabited), in the ) Limited (Steamship). The outlook has changed to stable from negative. The rating reflects the forecast reduction in free reserves Free reserves Excess reserves minus member bank borrowings at the Fed. in the year to Feb. 20, 2003, which, coupled with challenges associated with improving the Club's operating performance, results in a prospectively lower risk-adjusted capital level. However, the rating continues to factor Steamship's leading business profile as a member of the International Group of P&I Clubs and its excellent financial flexibility through the ability to call on its members should the need arise. Forecast reduction in free reserves -- Steamship experienced an aggregate deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in free reserves of USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 74.9 million between February February: see month. 2000 and February 2002. This prompted the Club in December 2001 to call an additional USD 110 million through unbudgeted supplementary calls, thus restoring risk-adjusted capital. However, A.M. Best expects a significant reduction in free reserves (between 25%-30%) for the current financial year to February 2003, renewing pressure on the risk-adjusted level. The Club's unique mutual status provides access to additional funds and hence excellent financial flexibility, which to some extent offsets this pressure. Challenges associated with improving operating performance -- Increased claims inflation and a higher frequency of attritional at·tri·tion n. 1. A rubbing away or wearing down by friction. 2. A gradual diminution in number or strength because of constant stress. 3. losses have exerted downward pressure on the Club's underwriting results -- combined ratio of 117.3% for the year ended Feb. 20, 2002 -- with a similar level forecast by A.M. Best for the current financial year. Historically, the Club has utilised investment returns to offset commissions and administrative expenses, with any excess retained as free reserves. However, in the last two financial years, Steamship has experienced significant investment losses due to a high exposure to equities (over 35% of total invested assets). Aggregate losses for these years amounted to USD 32.6 million. Steamship has responded by reducing equity exposure to 27% of total invested assets; however, in the prevailing market conditions, A.M. Best believes that in the near term operating profitability will continue to be affected by the Club's investment performance. Leading business profile -- At the end of 2001, Steamship was ranked fourth within the International Group, as measured by gross tonnage TONNAGE, mar. law. The capacity of a ship or vessel. 2. The act of congress of March 2, 1799, s. 64, 1 Story's L. U. S. 630, directs that to ascertain the tonnage of any ship or vessel, the surveyor, &c. . The Club's long-standing relationships with members and its ongoing successful focus on client service were also demonstrated, with renewal levels of 94% combined with new entries resulting in little overall change in tonnage levels, despite the call for additional funds. Expectation: -- The Club will experience a substantial operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. during the current year primarily from underwriting activities, combined with a lack of investment income. Results should improve in the following year due to a review of underwriting activities, including the levying of a 25% standard increase in common with the majority of other International Group clubs and a return to profitability in the investment portfolio. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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