S&P Lowers, Withdraws ESG Re Ltd. Ratings

November 29, 2002

Standard & Poor’s Ratings Services announced that it has lowered its long-term counterparty credit and insurer financial strength ratings on the main operating entities of Bermuda-based reinsurance group ESG Re Ltd. to ‘B’ from ‘BB-‘ with a negative outlook. It also removed the ratings from CreditWatch, where they were placed on Aug. 13, 2002.

S&P went on to announce that “The ratings on ESG were then withdrawn at the company’s request.”

“The downgrade,” said S&P “reflects the group’s weakened capital adequacy, limited ability to access external sources of finance, marginal business position, and the continuing volatility in reported earnings. This is offset by actions taken over the past two years to improve underwriting controls and to implement risk management processes.”

ESG specializes in providing accident, life, health, and disability reinsurance. S&P credit analyst Manish Bakhda concluded that “Until reserves have stabilized and the potential threats from ongoing litigation have been resolved, the impact on capital is uncertain, and the outlook is therefore negative. Nevertheless, management is expected to continue to enforce strict underwriting controls and to seek profitable growth in direct response marketing.”

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