Best Affirms Syndicate 1225 Ratings

February 27, 2007

A.M. Best Co. has affirmed its Syndicate Rating of “A” (Excellent) and issuer credit rating (ICR) of “a” of Lloyd’s Syndicate 1225, which is managed by AEGIS Managing Agency Ltd. The outlook for both ratings is stable.

“The ratings of syndicate 1225 primarily reflect support provided by the financial strength of the Lloyd’s market,” said Best. “In addition, the syndicate benefits from its association with its ultimate parent, Associated Electric and Gas Insurance Services Ltd (AEGIS Bermuda), which provides security for the syndicate’s funds at Lloyds.”

As an “offsetting factor” Best noted that the syndicate continues to experience “volatile earnings caused by high exposure to natural catastrophes from its relatively concentrated underwriting portfolio.”

Best said it “believes the syndicate is likely to generate good earnings for the 2007 year of account, subject to catastrophe experience. Enhanced catastrophe reinsurance protection has been purchased, which may somewhat reduce the wide fluctuation in returns observed in recent years, although A.M. Best believes the syndicate’s performance is likely to continue to be subject to volatility.”

Best also “forecasts a strong return of 18 percent on capacity for 2006, “as a result of favourable market conditions for its main lines of business, combined with a benign catastrophe season. However, performance on the 2005 year of account has deteriorated significantly due to increases in the syndicate’s estimates for its U.S. hurricane losses, and the year is likely to close with a significant loss of 20 percent on capacity. On an annually accounted basis, a good combined ratio of approximately 97 percent is likely (compared to 111 percent in 2005), despite the significant U.S. hurricane-related deterioration in 2006.”

The rating agency also stressed that “Syndicate 1225’s strong profile for its core energy business continues to be supported by its association with AEGIS Bermuda and has helped the syndicate to gain a leadership position in its market. Overall, the syndicate led on approximately 38 percent of the policies it wrote in 2006 and has a prominent position in the utility property, non-marine casualty and energy casualty markets where it leads on approximately 80 percent, 50 percent and 45 percent of its risks, respectively.”

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