Aug 21 -
Summary analysis -- Sunderland Marine Mutual Insurance Co. Ltd. --- 21-Aug-2012
CREDIT RATING: Country: United Kingdom
Local currency BBB+/Stable/--
Primary SIC: Fire, marine, and
Credit Rating History:
Local currency Foreign currency
10-May-2005 BBB+/-- --/--
05-Jul-2001 BBB/-- --/--
The ratings on Sunderland Marine Mutual Insurance Co. Ltd. (SMMI) reflect the company's good competitive position in SMMI's chosen niche markets, its strong liquidity, and a more conservative investment risk tolerance than in the past. These strengths are offset to a degree by the company's weakened capital adequacy as a result of 2011 operating losses, which in turn inhibits the company's prospects for growth and profitability in the short term.
Standard & Poor's Ratings Services considers SMMI's competitive position to be good, given the company's clear and sustained leadership in core niche segments of the marine insurance market. The company has been able to demonstrate a defendable position in its key business lines because of the strength and long-standing nature of its relationships with clients, its depth of technical expertise, and its geographic reach. The converse of this is a lack of scale and its dependence on the volatile marine sector and, for aquaculture, a small number of broker relationships.
We consider SMMI's capitalization to be good, but it was weakened significantly by an operating loss of GBP8 million (due to a series of high-value claims in the third quarter ended Sept. 30, 2011). As a result, the company's capital adequacy (as measured by Standard & Poor's risk-based model) only just supports the rating. Furthermore, the absolute amount of capital remains small. To protect this small capital base SMMI cedes a significant amount of profitable business to its reinsurers in order to reduce underwriting risk. This restricts SMMI's ability to build its capital base through underwriting surpluses.