S&P Raises U.K. Eccelesiastical Ins. To ‘A-‘; EIG-Ansvar to ‘BBB+’

December 22, 2005

Standard & Poor’s Ratings Services announced that it has raised its long-term counterparty credit and insurer financial strength ratings on U.K.-based non-life insurer Ecclesiastical Insurance Office PLC to “A-” from “BBB+.” S&P also raised its long-term counterparty credit and insurer financial strength ratings on related entity EIG-Ansvar Ltd. to ‘BBB+’ from ‘BBB’. The outlook on both entities is stable.

“The upgrade reflects Ecclesiastical’s improved business fundamentals, comprising its strong capitalization, strong competitive position, and strong operating performance,” stated S&P credit analyst Nigel Bond.

S&P noted, however, that these “positive factors are partly offset by Ecclesiastical’s investment strategy, which has led to relatively high (although declining) investment leverage.”

The stable outlook reflects S&P’s “expectation that Ecclesiastical will maintain its underwriting discipline in the face of increased price competition.” S&P said it “expects underwriting performance to deteriorate slightly in 2005, but less than had been expected; the net combined ratio should remain below 90 percent and be below 95 percent in 2006.

“Underwriting performance in the company’s U.K. specialist property business is expected to outperform its other lines of business. Standard & Poor’s does not expect Ecclesiastical’s consolidated capital adequacy ratio to be less than strong over the rating horizon. No significant change is expected either in the investment strategy or in the risk profile of the investment portfolio. It is highly unlikely that the ratings will be raised further over the intermediate term. However, in the unlikely event that the above expectations are not met, there might be negative implications for the ratings. “

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