S&P Assigns Oil Casualty Ins Ltd `A' Rtgs; Otlk Stabl.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

Dec. 20, 2000-- Standard & Poor's today assigned its single-'A' counterparty credit and financial strength ratings to Oil Casualty Insurance Ltd. (OCIL). The outlook is stable.

The rating is based on the company's extremely strong capital adequacy and strong operating performance. Offsetting these positive factors are OCIL's limited business review and challenges in achieving top-line growth in a limited customer base.

OCIL is a Class 3 Bermuda excess liability insurer, covering insureds that are companies in the energy industry. Since 1999, all of the premium written has been for policyholders that are also shareholders in the company (member companies).

Major Rating Factors:

-- Extremely strong capital adequacy. OCIL's capital adequacy is extremely
strong, sufficiently supporting the level of business written even without the
high levels of retrocession.

-- Strong management team. Following its restructuring, OCIL has a strong
management team and stabilized ownership base, which are further supported by
two boards of directors. The company's board is composed of risk managers from
member companies. The board of the investment company subsidiaries is composed
of senior financial executives from member companies.

-- Very strong investment performance. OCIL is managed for total return, using
a successful diversification strategy that has yielded above-average investment
performance over the past five years.

-- Good financial flexibility. OCIL enjoys strong financial flexibility, using
modest amounts of leverage to support short-term cash needs when that is more
tax efficient than upstreaming funds from the investment companies.

-- Limited business review. The business review of OCIL is good but limited by
its narrow industry focus, its narrow product line, and the coverage it
provides generally representing only part of an insured's full program.

-- Competitive challenges to achieve top-line growth. OCIL has a strong
management team and stabilized ownership base but faces competitive challenges
that have made it difficult for it to grow, especially in the context of
current market competitiveness. The competitive conditions have contributed to
recent and expected business changes designed to keep pace.

-- Less-conservative investment philosophy. OCIL pursues a total return
strategy, which appears aggressive. However, underwriting losses have
historically been few and readily met with portfolio liquidity, while the
strategy has yielded higher performance than a traditional portfolio would have
earned.

Oil Casualty Insurance Ltd. is a Security Circle insurer, which means that it voluntarily underwent Standard & Poor's most comprehensive analysis and was assigned ratings in one of the top four categories for financial security.

OUTLOOK: STABLE

Notwithstanding potential volatility in operating results, OCIL is expected to continue to achieve above-average operating results, with underwriting profitability combined with above-average total investment results. The key challenge to OCIL is maintaining its competitive advantage to its policyholders, though the company's ability to remain relevant is aided by its policyholder/shareholder captive structure, Standard & Poor's said.---CreditWire