A.M. Best Lowers Rating of Top Layer Reinsurance Ltd.

March 4, 2003

A.M. Best Co. has lowered the financial strength rating to A+ (Superior) from A++ (Superior) of Bermuda-based Top Layer Reinsurance Ltd. and maintained a stable outlook on the company.

The lowering of this rating is a result of the rating action recently taken by A.M. Best on State Farm Mutual Automobile Insurance Company (rated A++ (Superior)), a 50 percent joint owner of the company, along with Renaissance Reinsurance Ltd (rated A+ (Superior)).

While A.M. Best affirmed the financial strength rating of A++ (Superior) of State Farm, a negative outlook was assigned to that company reflecting uncertainties relating to several issues, including its prospective operating performance and its significant exposure to equity market volatility. A.M. Best believes the credit quality of Top Layer’s most significant backer has been modestly reduced and, as such, has lowered Top Layer’s rating to below the A++ level.

On a stand-alone basis, Top Layer is modestly capitalized respective to the high excess layers of property catastrophe risks it assumes, and its rating is materially dependent upon reinsurance protections it receives from State Farm and – to a much lesser degree – RenaissanceRe. State Farm provides Top Layer with $3.9 billion excess of $100 million stop-loss reinsurance protection, which includes a cut-through agreement to meet policyholder obligations should Top Layer become insolvent. Top Layer is also supported by letters of credit from State Farm and RenaissanceRe totaling $75 million and the ability to make a capital call to these companies each fiscal year for up to $100 million.

Despite this action, the company’s rating is still at the Superior level, reflecting the continued financial strength of State Farm along with Top Layer’s track record of outstanding operating results attributable to RenaissanceRe, who underwrites all the risks undertaken by the company.

Going forward, A.M. Best will continue to monitor Top Layer and the impact that any developments with State Farm may have on its rating.

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