S&P’s Affirms Lloyd’s Market ‘A’ Rating After Review

February 12, 2003

Following a review, Standard & Poor’s has affirmed its ‘A’ long-term insurer financial strength rating on U.K.-based Lloyd’s insurance market.

“The rating on Lloyd’s reflects the continuing commitment of capital
providers to the Market and the consequent increase in capacity and funds at Lloyd’s for 2003, as well as the likelihood of very strong operating performance for the 2002 and 2003 years of account,” Standard & Poor’s credit analyst Stephen Searby remarked.

These factors are partly offset by Lloyd’s reduced but recovering capital adequacy as a result of open-year losses; the further progress required with the implementation of structural reforms to maintain the Market’s competitive position; poor returns experienced by many capital providers prior to 2002; the vulnerability of the Market to reinsurer failure; and the Market’s continuing contingent exposure to Equitas Ltd.

Continuation of the rating at its current level depends upon a number of expectations being met. Capacity is expected to remain stable or increase slightly during 2003. It is expected that there will be further selective reductions in capacity by some members, but no significant withdrawals over the next few years.

Operating performance in 2003 is expected to be at least similar if not better than 2002. Further rate increases are expected during
2003, and rates in most lines of business are expected to be maintained during the 2003-2004 renewals.

The Central Fund will reach and is expected to remain above GBP500 million during 2003 and 2004. Equitas’ surplus (GBP679 million at March 31, 2002) is not expected to deteriorate significantly.

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