Best Places Select St. Paul Travelers Subs Under Review

August 9, 2005

A.M. Best Co. has placed the financial strength ratings (FSR) of A+(Superior) and issuer credit ratings (ICR) of “aa-” of GeoVera Insurance Company, USF&G Specialty Insurance Company (both domiciled in Hunt Valley, Md.) and Pacific Select Property Insurance Company (Fairfield, Calif.) under review with negative implications.

These rating actions follow the announcement by The St. Paul Travelers Companies Inc. (St. Paul Travelers) (St. Paul Minn.) regarding the signing of a definitive agreement to sell its CATRisk business operation, which consists of the three above entities, to affiliates of private equity investors, Friedman Fleischer & Lowe LLC and Hellman & Friedman LLC.

The three companies’ current FSRs of A+ (Superior) are a result of their affiliation with St. Paul Travelers Insurance Companies (St. Paul, Minn.) and their inter-company reinsurance agreements. This affiliation will continue until the transaction is finalized. Upon completion of the transaction – which is anticipated to occur in the fourth quarter 2005 – a newly formed group, which will include these three U.S. based companies will be assigned a rating separate from St. Paul Travelers Insurance Companies. The negative implications indicate that the ratings will likely be downgraded as the above companies will no longer be affiliated with St. Paul Travelers Insurance Companies. Based upon a review of the proposed business plan, it is anticipated that the ratings will be downgraded two notches.

The newly formed group will focus on underwriting catastrophe exposed residential property risks, primarily in California, Florida and Texas.

Also, the group will consist of a Bermuda domiciled holding company and reinsurance operating company, which will assume fifty-percent (50%) of the business produced from the three U.S. based entities.

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