Beazley’s New U.S. Insurance Company Earns Best’s Rating of A-

July 14, 2005

A.M. Best Co. has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to Beazley Insurance Company, Inc. (BICI) (Omaha, NE), a newly formed U.S. insurer that is part of the Beazley Group, plc (Beazley) (United Kingdom). Both ratings have a stable outlook.

The ratings reflect the initial capitalization and business plans of BICI, the favorable track record of the Lloyd’s Syndicates and the experienced senior management teams at both the syndicates and BICI, according to the rating organization.

The ratings also reflect the near-term earnings prospects to be derived from BICI’s planned focus on small to mid-sized accounts within the specialty admitted market; management’s intention to prudently manage its capital; and the explicit support provided through a quota share reinsurance agreement with Beazley syndicates at Lloyd’s (syndicates 623 and 2623). The ratings also acknowledge BICI’s quality balance sheet, which is unencumbered by debt and prior year reserve liabilities.

BICI’s initial capital consists of approximately $50 million, established via the contribution of funds from Beazley, a publicly quoted company on the London Stock Exchange. A.M. Best has analyzed the financial strength of the Beazley syndicates in light of the quota share support being provided, as well as the debt leverage and interest coverage at the parent company level, and is satisfied that they can support the individual ratings of BICI. In A.M. Best’s view, BICI’s conservative leverage targets will enable it to maintain capitalization that will comfortably support its risk profile as a start-up insurer.

The ratings also reflect the benefit of additional financial flexibility offered by the parent company and the strong operating fundamentals exhibited by the Beazley syndicates that are expected to be transferred to BICI.

The formation of BICI is part of Beazley’s expansion strategy, which includes building a significant local U.S.-based operation focused on underwriting small to mid-sized, low hazard specialty admitted risks to complement Beazley’s large U.S.-sourced surplus lines business written through Lloyd’s. By having an admitted operation in the United States, management expects to garner greater control over the quality and value of the portfolio, as well as the costs of acquiring and servicing the business.

These positive rating factors are offset by the significant challenges and uncertainties associated with newly formed, start-up companies, including the successful execution of its business plans, BICI’s acceptance among agents and brokers and management’s ability to grow its business profitably in a softening market. As with any other newly formed organization, A.M. Best will closely monitor BICI to ensure that targeted results are attained. Moreover, A.M. Best will continue to evaluate the company’s capitalization to ensure capital and surplus are in compliance with A.M. Best’s standards relative to the ratings.

Topics USA Carriers Excess Surplus AM Best

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