MBIA Offering Rated 'AA'

Fitch Ratings assigned an "AA" rating to MBIA Inc.'s $200 million 20-year senior debt offering. The bonds will bear interest at the rate of 6.4 percent per year. The company intends to use the net proceeds for general corporate purposes which may include retiring a portion of
its outstanding debt. MBIA Insurance Corp. (MBIA) is a monoline financial guarantor and the principal subsidiary of MBIA Inc. Fitch rated the insurer financial strength of MBIA "AAA".

MBIA Inc.'s debt rating is based on stable revenue flows and strong coverage levels. As of June 30, 2002 MBIA had an $8.1 billion investment portfolio, $5.1 billion in stockholders' equity, $2.1 billion in unearned premium reserves, and $1.1 billion in present value for future installment premiums. These resources produce stable and predictable revenue flows. MBIA Inc.'s net income for the six months ended June 30, was $298 million. Its full-year 2001 net income was $570 million. Including the new $200 million issue, MBIA's pro forma long-term debt-to-capital ratio will be 16.3 percent, which is in the moderate range.

National Indemnity Affirmed

A.M. Best Co. affirmed the group financial strength rating of "A++" (Superior) of National Indemnity Group (NIG), based in Omaha, Neb. The rating applies to National Indemnity Company and its eight affiliated property/casualty and life insurance companies that support
the group's operating profile. The rating reflects the group's extraordinary capitalization and balance sheet liquidity, superior earnings fundamentals, recognized leadership position in the global insurance and reinsurance market, as well as the considerable financial flexibility afforded it through affiliation with its parent, Berkshire Hathaway Inc.

Although NIG writes "super cat" and special risk insurance coverage, including terrorism coverage, its largest per occurrence catastrophe exposure is manageable, at less than 15 percent of statutory surplus due to its disciplined underwriting approach. It has also demonstrated the underwriting expertise to achieve favorable operating returns over the long term despite intermittent volatility in underwriting performance stemming from high severity losses and losses relating to large non-traditional reinsurance covers. On an economic basis, NIG has generated excellent total returns on equity, averaging 11.0 percent over the past 10 years, benefiting from significant investment "float" generated by long-term reinsurance contracts.

Modestly offsetting these positive factors is NIG's considerable common stock leverage, which is concentrated in a limited number of large U.S. corporations and a reported decline in statutory surplus for 2001. In 2001, the group suffered a decline in reported statutory surplus due largely to a change in accounting, which resulted in recording a significant deferred tax liability.

PMA Units Lowered

Standard & Poor's lowered its counterparty credit and financial strength ratings on U.S.-based reinsurer PMA Capital Insurance Co. (PMACIC) and regional primary writers Pennsylvania Manufacturers' Assoc. Insurance Co., Pennsylvania Manufacturers Indemnity Co., and Manufacturers Alliance Insurance Co. (collectively, PMAIG) to "A-" from "A." Simultaneously, the ratings were removed from CreditWatch negative, where they were placed on May 3, 2002.

S&P also issued its "BBB-" counterparty credit rating to the holding company, PMA Capital Corp. (PMACC), in addition to its preliminary "BBB-" senior debt, "BB+" subordinated debt, and "BB" preferred stock ratings on PMACC's $250 million universal shelf, which was filed on July 18, 2002.

The outlook is negative, reflecting uncertainty related to PMACC's execution of its capital raising initiatives as well as the expectation that earnings improvements will not materialize until 2003.

RSA Ratings Lowered

S&P lowered its long-term counterparty credit and insurer financial strength ratings on various operating entities of U.K.-based Royal & Sun Alliance Insurance Group PLC (RSA) to "A" from "A+" following a decline in the group's capital adequacy. The outlook is negative.

At the same time, S&P lowered to "BBB+" from "A-" its junior subordinated debt rating on notes issued by RSA and guaranteed by Royal & Sun Alliance Insurance PLC (RSAIP; local currency "A"/Negative/—, foreign currency "A"/Negative/"A-2"), the main operating company of RSA. In addition, S&P lowered to "A-2" from "A-1" its short-term rating on RSAIP's $1 billion CP program.

The ratings on RSA reflect the group's excellent global market position in general insurance and an improving earnings outlook. Offsetting this, capitalization is not consistent with the ratings, and the group's ability to secure external capital is restricted.