Trenwick Group Under Review

September 24, 2001

A.M. Best Co. has placed the FSR of “A” for the Trenwick Group, Bermuda, under review with negative implications. Additionally, A.M. Best has placed all related debt ratings under review with negative implications.

These actions follow the group’s second-quarter earnings release which reported additional reserve strengthening—the third such action since 1999. The under review status reflects A.M. Best’s concern with regard to the adequacy of Trenwick’s current loss reserve position and the uncertainty in its ability to restore profitability to levels commensurate with an “A” rating over the near-term.

As a result of recent poor performance, Trenwick’s ability to service its fixed obligations has been further weakened. Moreover, the financial leverage of the group, as measured by debt-plus-preferred to total adjusted capital has risen to 35 percent due to losses reported in the second quarter. This will continue to place pressure on the capitalization levels at the operating companies and potentially restrict capital formation due to the parent’s dependence on dividends to service debt obligations.

The ratings will remain under review pending further due diligence by A.M. Best on the group’s loss reserve position and discussions with management regarding its operating and capital strategies.

Topics AM Best

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