A.M. Best Affirms Rating for West of England

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A.M. Best Co. has affirmed the financial strength rating of A(Excellent) of the West of England Ship Owners Mutual Insurance Association (the Club), Luxembourg. The rating outlook is stable.

The rating reflects the Club’s excellent capitalization and financial flexibility, prospectively improving operating performance and leading business profile and market position.

West of England continues to have an excellent level of risk-adjusted capitalization. The absolute level of the Club’s free reserves has been under pressure in recent years due to competitive market conditions -soft rate environment and overcapacity – and volatility in the equity markets. However, in the opinion of A.M. Best, the current and forecast level of free reserves is adequate to support the Club’s short-medium-term premium growth forecasts. The Club has excellent financial flexibility through its ability to call additional funds from members, should the need arise, and the existence of a U.S. $10 million overdraft facility.

The withdrawal of fixed premium providers and hardening market conditions should enable the Club to improve its operating performance in the short term. The Club has consistently reported an increase in tonnage, and premium growth has resumed its upward trend in the year to February 2002, with gross premiums increasing by 3.4 percent.

Going forward, growth of 20-25 percent is forecast for 2003-2004 with further, more moderate growth levels in 2004-2005. Management’s focus on enhanced underwriting discipline and reducing the expense base should result in an improvement in the underlying profitability of the portfolio in addition to operating ratios. Continued favorable development of claims levels and costs and further reserve releases should also boost the bottom line result. A return to profitability is forecast for 2003/04.

The Club is a member of the International Group of P&I Clubs and is one of the leaders within this sector, both in terms of tonnage and premium levels. The Club benefits from the provision of high quality service to its members, both in terms of claims and loss prevention via offices in London, Hong Kong and Greece.

Further, its underwriting portfolio is well spread both geographically and by risk type.

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