Best Assigns Debt Rating to Society of Lloyd’s Subordinated Notes

October 13, 2004

A.M. Best Co. has assigned a “bbb+” debt rating to the forthcoming dated Subordinated Notes to be issued by the Society of Lloyd’s (United Kingdom). At the same time, A.M. Best has assigned an issuer credit rating (ICR) of “a-” to the Society of Lloyd’s. The proposed issue can be redeemed by the Society after ten years (or any coupon rest date thereafter), although the proposed maturity date will be substantially later. The outlook for both ratings is stable.

The rating of the debt issue reflects its subordination to payments from the central fund in respect of the insurance liabilities of insolvent members and other unsecured senior obligations of the Society. A.M. Best believes that the notes introduce a manageable level of gearing into the Society’s central mutual capital whilst enhancing its financial flexibility. The Society’s sources of income with which to service its debt obligations include an element of adaptability derived from its power to require payment of Central Fund contributions, subscriptions and levies from its underwriting members.

A.M. Best anticipates that the Subordinated Notes will be admissible as Tier 2 capital within the UK Financial Services Authority’s new capital adequacy regime and will therefore contribute to increasing the solvency capital of Lloyd’s of London (Lloyd’s). (See A.M. Best’s press release of 12 August, 2004). The financial strength rating of Lloyd’s is A (Excellent) and its ICR is “a.”

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