Bermuda-domiciled Inter-Ocean Reinsurance Co. Ltd., assigning the company its single-`A' claims-paying ability rating.

S&P said the rating reflects considerations of the finite risk reinsurer's shareholder relationships, reinsurance, capital adequacy, good operating performance, investment performance, underwriting record and limited track record.

Inter-Ocean Re is a joint venture among ten of the world's leading insurance and reinsurance companies.

Inter-Ocean is furnished with underwriting and other management services by Am-Re Managers (Bermuda) Ltd., a wholly owned subsidiary of American Reinsurance Company (triple-A claims paying ability).

S&P does not believe that current management will change or compromise underwriting philosophies, but will regroup to meet the rising challenges.

The company's parent, Inter-Ocean Holdings Ltd., is proportionately owned by ten shareholders that are diversified throughout the US and international insurance and reinsurance markets.

American Re exerts the most influence over Inter-Ocean operations through the Am-Re Managers subsidiary, which provides administrative, investment and underwriting services through its own operations or those of affiliated entities.

Inter-Ocean's underwriting risks and timing risks are retroceded 100 percent.

Retrocession is obtained prior to or concurrently with the acceptance of any risk.

Retrocessions are channelled to active shareholders through Inter-Ocean's claims settlement facilities on a proportioned basis or through individualised retrocessions. All retrocessionaires are of single-`A' minus quality or better, and credit risk is minimised by access to a $125-million letter of credit facility, if necessary. With no retention of risk, operational leverage, as measured by gross written premiums to equity is considered modest for finite business. For 1995, reported GAAP equity was $42.3 million, and remained flat for the nine months through September 30, 1996. If required, an additional $100 million of capital has been committed by shareholders with allocation correlated to each shareholder's proportioned investment.

Inter-Ocean retains a fee or margin relating to each individual contract. As of the nine months to the end of September, 70 percent of the company's $4,000,000 in fee income was placed through reinsurance intermediary Am-Re Brokers.

Inter-Ocean's profit margin was 54.9 percent for the nine months to September 30, improving its five year average of 45.5 percent.

The investment portfolio has an average double-`A' calibre, with about 82 percent invested in long-term bonds. Investment concentrations are virtually all focused within the corporate, government and high quality mortgage-backed securities sectors.

The company president left in late 1995, followed by the chief underwriting officer early in 1996 and the company experienced a lapse in new business submissions. But renewals preserved the majority of the book of business and a broader-based management team was engaged.