Best Affirms General Re Group Ratings of ‘A++’

June 16, 2004

A.M. Best Co. has affirmed the financial strength ratings of “A++” (Superior) of the General Re Group. The rating applies to General Reinsurance Corporation (Delaware) and its core property/casualty and life reinsurance and insurance subsidiaries operating both in the United States and internationally. In addition, A.M. Best has affirmed the senior debt rating of “aa+” and a commercial paper rating of AMB-1+ of General Re Corporation, the group’s direct parent, and the “aa” senior debt rating to National Re Corporation (Delaware), an intermediate holding company. The outlook for all the ratings is stable.

The A++ (Superior) rating on the core members of the General Re Group reflects both the implicit and explicit financial support provided by the group’s ultimate parent, Berkshire Hathaway Inc. The rating also recognizes the group’s strengthening balance sheet and respected leadership position in the global reinsurance marketplace. In turn, these attributes support the company’s strong prospective earnings capability, enhanced by an underwriting discipline that focuses on adequate pricing and appropriate structures, terms and conditions.

General Re Group’s consolidated risk-adjusted GAAP and U.S. statutory balance sheets’ strength have been sustained over the past two years by significant reinsurance support provided by affiliates, National Indemnity Company and Columbia Insurance Company (both subsidiaries of Berkshire Hathaway Inc.). The calendar year stop-loss reinsurance, which attaches at a 104 percent combined ratio and expires on Dec. 31, 2005, provides $4 billion of total coverage, of which approximately $3.2 billion of limit currently remains. Additionally, Berkshire Hathaway has committed to forego stockholder dividends from General Re Corporation until the group has adequately replenished its stand-alone capital position.

Notwithstanding a conservative reserving posture, the group remains exposed to the potential for further adverse reserve development, given material loss emergence in the primary insurance sector for long-tail casualty classes of business and increased litigation activity relative to asbestos claims. Further, the strategic benefit of General Re’s international reinsurance operations—Cologne Re—is partially offset by its recent operating performance, which continues to encumber the international subsidiaries’ stand alone rating profile. Cologne Re is continuing to re-underwrite the portfolio; however, if pricing pressure gains impetus in the market, A.M. Best believes Cologne Re’s reported underwriting results are unlikely to be commensurate with its rating. Despite these concerns, A.M. Best believes that the overall financial flexibility of General Re Group is greatly enhanced by the explicit commitment and superior financial strength of Berkshire Hathaway.

The consolidated group’s corporate financial leverage is conservative at under 20 percent, while cash and fixed charge coverages were strong at year-end 2003. General Re Corporation not only has access to dividends from its regulated insurance subsidiaries but also has the ability to service its debt obligations from diverse funding sources including earnings from its non-insurance subsidiaries, bank lines, commercial paper program, access to the capital markets and a liquid balance sheet.

The financial strength rating of “A++” (Superior) applies to the following core property/casualty and life reinsurance and insurance companies:

· General Reinsurance Corporation
· General Star Indemnity Company
· General Star National Insurance Company
· Genesis Indemnity Insurance Company
· Genesis Insurance Company
· Faraday Reinsurance Co. Limited
· General Reinsurance UK Limited
· Kölnische Rückversicherung-Gesellschaft AG
· Cologne Reinsurance Company (Dublin) Ltd.
· GeneralCologne Re Rückversicherungs-AG
· General Reinsurance Australia Ltd
· GeneralCologne Re Africa Limited
· General Reinsurance Life UK Limited
· General Reinsurance Life Australia Ltd.

The following debt ratings have been affirmed:

General Re Corporation—
— “aa+” on $150 million 9 percent senior unsecured debentures, due 2009

— AMB-1+ on commercial paper

National Re Corporation—
— “aa” on $100 million 8.85% senior unsecured notes, due 2005
— “aa” on $25 million 7.50% senior unsecured notes, due 2005

Topics Reinsurance AM Best Berkshire Hathaway

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