Best Assigns Rating for Lloyd’s Syndicate 1225

January 27, 2005

A.M. Best Co. has assigned a Best’s Syndicate Rating of A (Excellent) and an issuer credit rating (ICR) of “a” to Lloyd’s Syndicate 1225 (United Kingdom), which is managed by AEGIS Managing Agency Ltd (AEGIS UK). The ultimate parent of AEGIS UK is Associated Electric and Gas Insurance Services Ltd (AEGIS Bermuda), a mutual energy insurer. The outlook for both ratings is stable.

The syndicate benefits from the financial strength of the Lloyd’s market – currently rated A (Excellent) – which underpins the security of all Lloyd’s syndicates. In addition, the ratings reflect the syndicate’s excellent prospective performance, its strong profile for its core energy business and its solid financial resources. The rating is based on A.M. Best’s specific syndicate criteria.

A.M. Best believes the syndicate is likely to produce a profit when the 2004 year of account closes, although below the level anticipated for 2002 and 2003 of 12.5% and 20% on capacity respectively (in line with the syndicate’s September 2004 Quarterly Monitoring Report). Performance will be affected by catastrophes in the second half of 2004, with the greater part of anticipated net losses of approximately USD 50 million falling to the 2004 year of account.

The syndicate has a stop loss reinsurance in place for the 1999 and 2000 years of account which will protect it from significant further losses related to these poorly performing years. Improved performance has been achieved as a result of changes in the management team and underwriting strategy implemented in 2001, as well as improvement in market conditions.

Syndicate 1225’s strong profile for its core energy business is supported by its association with AEGIS Bermuda. A.M. Best anticipates an increase in the amount of business the syndicate leads in the medium term, with business written in Europe for members of AEGIS Bermuda accounting for a larger part of the account.

In A.M. Best’s opinion the syndicate is likely to continue to benefit from both strong cash flow and financial support from AEGIS Bermuda. In addition to this support, A.M. Best believes the syndicate’s capitalization is enhanced by its Funds at Lloyd’s which are currently over GBP 20 million (USD 38 million) above the required level as determined by Lloyd’s.

A.M. Best believes the syndicate’s financial flexibility is likely to be further enhanced in the short term by retained earnings within AEGIS Electric & Gas International Services Limited, the syndicate’s sole dedicated capital provider.

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