Best Affirms FSR for Clarendon Group

January 18, 2006

A.M. Best Co. has assigned a financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” to the newly formed Praetorian Financial Group (Praetorian) (Wilmington, Del.) and its property/casualty members. Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and assigned ICRs of “a-” to the members of the Clarendon Insurance Group (Clarendon) (Wilmington, Del.). All ratings have a stable outlook.

These rating actions follow execution of Clarendon’s realigned business strategy, the continued reinsurance support provided by its ultimate parent, Hannover Rueckversicherung AG (Hannover Re) (Germany), and the reorganization of companies within Hannover Finance Inc. (the intermediate U.S. holding company), including the formation of Praetorian.

Insurance Corporation of Hannover (ICH) had previously received the rating of its ultimate parent company, Hannover Re. ICH currently receives the rating of the newly-formed Praetorian Financial Group. During the third quarter of 2005, Clarendon National Insurance Company sold ICH and Redland Insurance Company to Hannover Finance Inc., which subsequently contributed these companies to Praetorian Inc. On Dec. 21, 2005, regulatory approval was obtained to facilitate the separation of core specialty business that will be written by Praetorian from the discontinued commodity business being managed by Clarendon.

Clarendon’s ratings are based on the level of capital supporting its net liabilities, adequate cash flow projections and the explicit and implicit financial support provided by Hannover Re, including additional reinsurance support relative to the discounted book of program business.

Praetorian’s ratings reflect solid risk-adjusted capitalization, its specialty niche business focus and its role within Hannover Re. The ratings also acknowledge the underlying profitability of the business written pursuant to management’s disciplined underwriting processes, sound audit control mechanisms governing its managing general agency relationships and the implicit and explicit support provided by Hannover Re, including Praetorian’s initial capitalization.

The FSR of A- (Excellent) has been affirmed and the ICRs of “a-” have been assigned to the following property/casualty members of the Clarendon Insurance Group:

* Clarendon National Insurance Company
* Clarendon America Insurance Company
* Clarendon Select Insurance Company
* Harbor Specialty Insurance Company

FSRs of A- (Excellent) and ICRs of “a-” have been assigned to Praetorian Financial Group and its following property/casualty members:

* Insurance Corporation of Hannover
* Redland Insurance Company.

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