Best Affirms FSR for International Insurance Co. of Hannover Ltd.

July 14, 2005

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of International Insurance Company of Hannover Limited (Inter Hannover) (United Kingdom), a subsidiary of Hannover Rueckversicherung AG (Hannover Re) (Germany). The rating outlook is stable.

The rating reflects Inter Hannover’s good business profile, adequate risk-adjusted capitalization and its good and stable financial performance. The rating continues to benefit from the implicit support of its parent as Inter Hannover remains Hannover Re’s only platform for writing programme business in the United Kingdom and Europe, while also fronting some direct business for Hannover Re.

A.M. Best believes that gross written premium is likely to remain stable in 2005 as the growth of three new underwriting agencies signed in 2004 will offset the cancellations that have taken place in recent years and the anticipated 10% decline in the fronting business.

A.M. Best believes Inter Hannover’s prospective risk-adjusted capitalization will remain stable as the strain arising from the substantial increase in retained business (a projected 45% increase in net written premium in 2005) will be alleviated by a GBP 8 million (USD 14 million) subordinated loan from Hannover Re in 2005, which has equity characteristics according to A.M. Best’s rating methodology. The high level of reinsurance recoverables is largely driven by Inter Hannover acting as a fronting entity for Hannover Re, thus limiting the arising counterparty risk.

A.M. Best believes that Inter Hannover’s operating performance is likely to remain stable in 2005. The softening rates are unlikely to impact underwriting performance due to the changes in portfolio and underwriting agencies that occurred in 2004. The combined ratio is likely to remain relatively stable at approximately 95%-98% in 2005, compared to 94.5% in 2004.

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