A.M. Best Affirms Ratings for Aon’s Underwriting Subsidiaries

January 28, 2003

A.M. Best Co. has affirmed the A (Excellent) financial strength ratings of Chicago-based Aon Corporation’s key insurance underwriting subsidiaries and removed the ratings from under review.

The ratings were placed under review with negative implications following Aon’s decision to withdraw its previous plans to spin-off its underwriting units. The action follows Aon’s subsequent announcement that it will not pursue a specialty property and casualty underwriting strategy and its plans to retain ownership of its underwriting entities.

This action also takes into consideration Aon’s recent capital raising initiatives and the renewed focus on its warranty and accident and health businesses, while recognizing their positions as members of Aon Corp. – one of the world’s largest insurance brokerage services organizations.

The A (Excellent) rating of Combined Specialty Insurance Company (CSIC), formerly named Virginia Surety Company, Inc., reflects the company’s leadership position in the extended warranty marketplace, its proven track record in this market and the recent action taken by Aon to preserve CSIC’s risk-adjusted capitalization through the suspension of dividends paid to Aon in 2002 and 2003. The rating also contemplates the successful run-off of Combined Specialty’s new commercial casualty business written in 2002, the realignment of Combined Specialty’s management team and the company’s back-to-basics approach.

The A (Excellent) financial strength rating of Combined Insurance Company of America (CICA), reflects its leadership position in the middle income market for individual accident and health products, historically strong operating performance, steady cash flows, disciplined underwriting and seasoned management team. Additionally, CICA maintains significant operations in Canada – it is the second leading writer of individual health coverages – as well as various countries in Europe and Asia Pacific, all of which are generally profitable. Offsetting considerations are CICA’s recent modest revenue and earnings growth and CICA’s exposure, albeit reduced, to higher-risk assets such as preferred stock, common equities and limited partnerships relative to several peers.

The financial strength rating of Sheffield Insurance Corporation, a non-admitted insurer acquired from Vesta Insurance Group in 2002, remains under review with negative implications pending regulatory approval of its sale to Bermuda-based, Axis Specialty Limited. The assignment of negative implications to Sheffield is based on the realignment of its rating when brought in line with the current financial strength rating of Axis Specialty. The transaction is expected to close during the first quarter of 2003.

As a result, with the exception of Sheffield, the outlook for all of the ratings is stable.

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