A.M. Best Downgrades The Underwriter Insurance Company Rating

May 21, 2003

A.M. Best Co. announced that it has downgraded the financial strength rating to B+ (Very Good) from B++ (Very Good) of U.K.-based The Underwriter Insurance Company Limited (TU), and maintained its negative outlook on the insurer.

Best said “The downgrade to B++ on April 8, 2003, was based on the assumption that there would be no further deterioration in the capital base. Today’s downgrade reflects A.M. Best’s understanding that TU’s loss reserves will require further significant strengthening.”

Best indicated that this reserve strengthening would further erode TU’s capital position by as much as £45 million ($73.35 million), which it noted marked “a decline of more than 40% from year 2000 levels.”

It also recognized that the company “has revised its business strategy and introduced a wide range of measures to restructure the composition and risk profile of the portfolio, reduce expenses and enhance underwriting control. Management has commented that they will not be receiving a capital injection from existing shareholders in the short term.”

Best concluded that the maintenance of the B+ rating is based on its “expectations that there will be no further deterioration in TU’s capital base and the successful implementation of the revised business strategy.”

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