HFSG on Watch Neg

Fitch Ratings placed its fixed income ratings for Hartford Financial Sevices Group Inc. (HFSG) and its insurer financial strength ratings for Hartford Fire Intercompany Pool (Hartford Fire) on rating watch negative. The action followed the company's announcement that it has initiated a comprehensive review of its current asbestos liabilities. Completion of the review is not expected until the end of the second quarter 2003.

Fitch anticipates that HFSG is likely to contract a reserve charge at the completion of the reserve study, but the magnitude of the charge is unknown at this time. In addition, any possible plans to replace capital lost by the charge is also unknown. Fitch will consider HFSG's favorable operating performance in 2002, which generated internal capital formation in its property/casualty operations. The company has strong and consistent operating performance, good balance sheet and broad business diversification. It also has a strong property/casualty underwriting track record, good asset quality and long-term profitable growth trends.

Prudential P/C Grp. Under Review

The financial strength rating of "A-" (Excellent) of Prudential Property and Casualty Group and its separately rated subsidiary, THI Holdings Group (Cleveland, Ohio), are under review by A.M. Best, with negative implications. The under review status reflects A.M. Best's concerns with the continued sub-par operating performance and stand-alone capitalization of Prudential Property and Casualty Group, despite improvement in accident-year 2002 performance. In addition, it reflects continued concerns for the long-term strategic fit for property and casualty companies in Prudential Financial.

Argonaut Lowered

Argonaut Group Inc.'s property/casualty insurance companies counterparty credit and financial strength ratings have been lowered to "BBB+" from "A" by Standard & Poor's Ratings Services based on the likely capital strain related to the announced asbestos and environmental study and the company's declining capitalization. The ratings remain on CreditWatch with negative implications.

S&P's believes Argonaut will continue to face challenges associated with the execution risk from its recent acquisitions, loss reserve profile of its prior year workers' compensation book, and a return to its historical underwriting profitability levels. The net outcome of its 2002 asbestos and environmental liabilities study is expected to place additional strain on its current capital position. S&P's expects that Argonaut will continue to pursue capital-raising initiatives in the first quarter of 2003, but the recent delay in earnings reports and the resulting drop in the share price could affect the company's ability to successfully raise additional capital within that time frame.

Gerling Global Withdrawn

A.M Best Co. withdrew the financial strength rating "B-" (Fair) of Gerling Global Reinsurance Corporation (GGRCA) and its subsidiary, Constitution Insurance Company (CIC), and assigned an NR-3 rating (Rating Procedure Inapplicable) for both companies in New York. GGRCA's parent company, Gerling Konzern Globale Ruckversicherung, requested to withdraw its U.S. subsidiaries from the interactive rating process. The financial strength ratings of the U.S. subsidiaries, which are in runoff, were downgraded to "B-" (Fair) from "B+" (Very Good) in Dec. 2002.

The rating actions follow the announcement of the prospective sale of Gerling Global Re's (Germany) non-life activities, of which both GGRCA and the CIC are part, to Lago Achte GmbH.

AON Affirmed

The "A" (Excellent) financial strength ratings of Aon Corporation's key insurance underwriting subsidiaries were affirmed by A.M. Best Co. The ratings were held under review with negative implications following Aon's decision to withdraw its plan to spin-off its underwriting units. Aon also had a subsequent announcement that it would not pursue a specialty property and casualty underwriting strategy.

The "A" rating of Combined Specialty Insurance Company (CSIC), reflects the company's leadership position in the extended warranty marketplace and the recent action taken by Aon to sustain CSIC's risk-adjusted capitalization through the suspension of dividends paid to Aon in 2002 and 2003.

The financial strength rating of Sheffield Insurance Corporation, a non-admitted insurer acquired from Vesta Insurance Group in 2002, remains under review with negative implications pending regulatory approval of its sale to Bermuda-based, Axis Specialty Limited. The transaction is expected to close during the first quarter of 2003. With the exception of Sheffield, the outlook for all of the ratings is stable.

ACE Ltd. on CreditWatch Neg

S&P's placed its "A-/A-2" counterparty credit rating on ACE Ltd. on CreditWatch with negative implications due to ACE's announcement that it will strengthen its asbestos reserves by $2.18 billion (gross) ($516 million net; $354 million after taxes). S&P's also placed on CreditWatch negative its "A+" counterparty credit and financial strength ratings on the various members of the ACE Group and its "BBB" counterparty credit and financial strength ratings on the members of the Brandywine Group.

The CreditWatch action reflects S&P's concerns about the group's capital adequacy, accumulated credit risk to reinsurance recoverables, and the managed run-off of historical liabilities. Although management of these areas has progressed well, and bad debt reserves were increased as part of the current charge, S&P's remain concerned with the rapid growth of reinsurance credit exposure on ACE's balance sheet and the prior-year loss-estimate uncertainties that remain within certain business segments.