Converium North America Downgraded

Following the latest announced business plan by Converium AG, A.M. Best Co. downgraded the financial strength rating to "B" (fair) from "B++" (very good) of Converium Insurance North America (CINA). Concurrently, Best downgraded the issuer credit rating to "b-" from "bb-" of Converium Holdings North America (CHNA) and the issuer credit rating to "bb" from "bbb" of CINA. Best also downgraded the debt rating to "b-" from "bb-"on CHNA's $200 million 7.125 percent senior notes, due 2023 and originally issued by Zurich Reinsurance Centre Holdings Inc. The ratings have been removed from under review and assigned a negative outlook. The financial strength rating of "B-" (fair) and the issuer credit rating of "bb-" of Converium Reinsurance North America (CRNA) remain unaffected.

The rating downgrades are based on Converium management's plan to cease underwriting at CINA. Converium has indicated that CINA operations will be dormant for the foreseeable future, with no immediate plans of business activity. Earlier, Converium announced that additional capital would not be contributed to CINA as was originally planned. The additional capital injection was intended to support previously planned ongoing U.S. business written through CINA. However, Converium's current plan is to write all future ongoing U.S. business through Converium and its Bermuda branch.

The downgrading of CHNA's debt rating is based on Converium's decision to make CINA's operations dormant and place CRNA's operations into runoff. These actions leave CHNA without an actively operating subsidiary to support required interest payments. The negative outlook reflects Best's opinion that Converium's North American franchise has been dramatically weakened and any possible future efforts to re-establish a viable business plan for the U.S. subsidiaries will deplete capital and operational focus from the European parent.

Employers Re Affirmed

Standard & Poor's Ratings Services affirmed its "A+" counterparty credit and financial strength ratings on Employers Reinsurance Corp. and affiliated insurance/reinsurance entities (collectively ERC). The outlook remains negative. S&P additionally affirmed its "A-" counterparty and senior debt ratings on GE Insurance Solutions Corp., an intermediary holding company that serves as ERC's immediate parent, ultimately owned by General Electric Co.

S&P said ERC has a strong global reinsurance franchise, a moderately improving operating performance and a conservative investment portfolio. The ratings also reflect ERC's position as a nonstrategic subsidiary of GE. Partially offsetting these factors is uncertainty in the group's loss reserve position and a lower business mix diversification.

American Superior Rated "R"

S&P assigned its "R" financial strength rating to American Superior Ins. Co. based on the company's recent announcement that it has agreed to be put under rehabilitation by the Division of Rehabilitation and Liquidation of the Florida Department of Financial Services.

American Superior, a small homeowners insurer covering about 60,000 Floridians, agreed to enter rehabilitation after concluding that it lacked the sufficient reserves and operational resources to handle claims related to Hurricanes Charley, Frances, Ivan and Jeanne.

The company was hit particularly hard because of the extent of storm-related damage done in the Florida panhandle area, where it holds significant business concentration. Under rehabilitation, the company will be precluded from writing new business, but will be able to renew existing business. No policies will be cancelled. American Superior reported a profit in only one of the last five years (2001). In 2003, the company reported surplus of $5.3 million and wrote total homeowners insurance premium of $34.3 million.

Nationwide Under Review

A.M. Best Co. placed the "A-" (excellent) financial strength rating of Nationwide Ins. Co. of Florida (NICOF) under review with negative implications, as a result of anticipated losses associated with Hurricanes Charley, Frances, Ivan and Jeanne, and the subsequent reduction of the company's risk adjusted capitalization. Although established as a separate legal entity within the Nationwide Group, NICOF's financial strength rating reflects both the explicit and implicit support of its parent, Nationwide Mutual Ins. Co.

A.M. Best remains concerned with NICOF's risk-adjusted capitalization and elevated probable maximum loss relative to its surplus.

Accordingly, maintaining the current rating level is contingent upon additional financial support from Nationwide Mutual Ins. Co.