Best Comments on Universal Underwriters Group; Downgrades UULIC Rating

April 5, 2005

A.M. Best Co. announced that the financial strength rating of “A” (Excellent) of Universal Underwriters Insurance Company, based in Overland Park, Kansas, and its wholly-owned subsidiary, Universal Underwriters of Texas Insurance Company of Plano, Texas, “remains unchanged following the announcement by Zurich Financial Services of its intent to sell these two property/casualty insurers, as well as Universal Underwriters Life Insurance Company (UULIC), to an investor group led by private equity firm Hellman & Friedman LLC.”

Best said, however that it has downgraded the rating of UULIC to “A-” (Excellent) from “A” (Excellent). The outlook for all ratings is stable.

Best noted that it has “reviewed the proposed transaction details, including the use of a moderate amount of debt to fund the acquisition. While the amount of financial leverage anticipated is at the upper end of the acceptable range for similarly rated insurers, debt service requirements from the insurance subsidiaries are anticipated to be reasonable. Furthermore, the Universal Underwriters Group, which is a market leader in the automotive aftermarket and dealership industries, will continue to be managed by the same team of executives with infrastructure that has been in place for many years.”

Best also indicated: “It is anticipated that the property/casualty companies will be depooled at the time of the transaction with all liabilities and supporting assets previously ceded to Zurich American Insurance Company returned to Universal Underwriters Group. Since the start of 2002, the property/casualty companies have ceded all net business, after third-party reinsurance, to Zurich American Insurance Company. ”

The rating agency said the “downgradie of UULIC’s rating “reflects the anticipated decline in its surplus as a result of an extraordinary dividend related to the transaction, its declining premium levels and limited business profile.

“In addition, reported earnings will be reduced as a result of the lower level of invested assets and limited growth in premium income. A.M. Best believes that despite the lower capital level, UULIC will remain adequately capitalized and will continue to contribute to the Universal Underwriters Group in its role as the provider of credit life and credit disability products.”

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