March 4 (The following statement was released by the rating agency)
Fitch Ratings has revised Sunderland Marine Mutual
Insurance Company's (SMMI) Outlook to Positive from Stable and affirmed its
Insurer Financial Strength (IFS) Rating at 'A-'.
KEY RATING DRIVERS
The Outlook revision follows the formal completion of the merger between SMMI
and The North of England Protecting and Indemnity Association Limited (North),
whereby SMMI will become a subsidiary of North. The Positive Outlook reflects
Fitch's expectation that SMMI's financial profile will benefit from being part
of a larger group, providing access to further business development
opportunities, increased capital strength, partly through the existence of an
explicit parental support guarantee, and cost savings achieved through the
purchase of external reinsurance on a greater scale.
The increased size of the combined group will allow SMMI to pursue growth
opportunities through the contacts and regional offices of North, especially in
the Far East, with Fitch considering North and SMMI's strategic platforms to
complement each other. SMMI underwrites marine hull and machinery policies, as
well as aquaculture, whereas North focuses on marine mutual liability insurance.
SMMI's insured fleet of fishing vessels and professionally crewed inshore craft
is also in contrast to the larger ocean going or blue water vessels underwritten
North is the world's second-largest marine mutual liability insurer as measured
by owned tonnage. As at 20 February 2013 North had premium income of USD365m and
total free reserves of USD312m. This would result in a combined group with
premium income of over USD500m and free reserves of over USD350m.
North has entered into a parent company guarantee with SMMI whereby North has
agreed to be ultimately responsible for SMMI's liabilities, including ensuring
that the company is sufficiently capitalised to meet applicable regulatory
The key rating trigger for an upgrade would be a review of the consolidated
group with management to determine the prospective consolidated financial
strength of the group and in particular the financial strength of North given
the parent company guarantee currently in place.
Given the improving financial performance of the group, Fitch views a downgrade
as unlikely in the medium term.