TEXT-Fitch affirms Sunderland Marine's IFS rtg at 'A-';outlook negative


(The following statement was released by the rating agency)

Oct 11 - Fitch Ratings has affirmed Sunderland Marine Mutual Insurance Company's (SMMI)Insurer Financial Strength (IFS) Rating at 'A-' with a Negative Outlook.

The affirmation reflects Fitch's assessment that SMMI's capital adequacy, as assessed byFitch, has remained supportive of the rating despite the company incurring a material loss ofGBP8.0m in 2011 (2010: net profit of GBP2.4m). The company's low financial leverage,conservative investment strategy, well established franchise and high customer retention areother factors that lend support to the rating.

The Negative Outlook reflects the agency's concern regarding the company's current weakfinancial performance. The loss incurred in 2011 was driven by unfavourable claims experience,with the Fitch-calculated combined ratio deteriorating to 119.5% from 100.7% in 2010. AlthoughFitch believes that the poor 2011 result was of an exceptional one-off nature, the agencyexpects SMMI to report another net loss in 2012, albeit at a much lower level than 2011. SMMI'smain challenge over the foreseeable future is to improve its underwriting margins to make up forlower investment income, and the company's ability to restore profitability will be a key ratingdriver over the near term.

SMMI is a leading insurer in its chosen niche markets, which include marine, liability andaquaculture insurance. It conducts business in over 50 countries and wrote gross premiums in2011 of GBP75.1m (2010: GBP73.7m). The group's business portfolio includes hull & machinery(63.5%), protection & indemnity and personal accident (21.4%) and storm damage and disease risksfor aquaculture (15.1%). It is well diversified geographically and derives 17.3% of its premiumsfrom the UK, 39.2% from North America, 14.0% from Europe, 14.8% from Australia and 14.7% fromother areas.

Key rating triggers for a downgrade include a failure to return to profitable underwritingin 2013. In addition, a Fitch-calculated combined ratio in excess of 105% for 2012 could lead toa downgrade. Reduced use of reinsurance, which could weaken SMMI's Fitch-assessed capitalposition, could also lead to a downgrade.

Given the company's current financial and strategic profile, the agency does not foresee anupgrade within the medium term.

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((Bangalore Ratings Team, Hotline: +91 80 4135 5898swati.ray@thomsonreuters.com,Group id:BangaloreRatings@thomsonreuters.com,Reuters Messaging:swati.ray.thomsonreuters.com@reuters.net))