A.M. Best Downgrades Ratings of Winterthur Group

March 21, 2003

A.M. Best Co. has downgraded the financial strength ratings of Winterthur Swiss Insurance Company (Switzerland) and its core subsidiary, Winterthur Life Insurance Company (Switzerland), collectively known as Winterthur Group, to A (Excellent) from A+ (Superior).

At the same time, A.M. Best has placed the ratings under review with negative implications while it continues to discuss with Winterthur management issues related to the capital requirements supporting the current business plan.

The rating actions reflect the significant deterioration in consolidated risk-adjusted capitalisation, which was greater than expected by A.M. Best, the fall in earnings in 2002 and the challenges posed by the current volatile financial markets. The rating does not factor any implicit support from Credit Suisse Group.

Significant deterioration in risk adjusted capitalisation level – On a consolidated risk-adjusted basis, Winterthur’s capital base continued to deteriorate in 2002, despite an injection in 2002 of CHF 3.7 billion (approximately USD 2.7 billion) of eligible solvency capital from Winterthur’s ultimate parent, Credit Suisse Group. As the company’s new strategy unfolds, A.M. Best expects the capital to grow through retained earnings in 2003 and 2004, supported in part by the measures Winterthur took in 2002 to reduce its asset risk profile.

Prospectively improving operating performance – After a substantial loss in 2002, primarily resulting from lower investment income due to adverse equity market developments, Winterthur continues to focus on improving the underlying profitability of its insurance businesses through the implementation of substantial premium rate increases, selective underwriting and expense reduction. The 2002 consolidated combined ratio and the underlying expense ratio in the life businesses have moderately improved, and further synergies and efficiencies should be generated through the merger of the property casualty and life operations in all markets except Switzerland and the United Kingdom.

A sufficient improvement in earnings will be realised to enable growth in the capital base and to support the current business plan. Further deterioration in risk-based capital – although believed unlikely – would trigger an immediate rating review. An improvement in underwriting performance will develop to ensure the financial expectations and targets of the parent company are met.

A.M. Best will continue to closely monitor developments with Winterthur as the company’s revised strategy unfolds, specifically with regard to the forecast improvement in operating performance and the impact that these developments may have on the under review status for the operations. A.M. Best intends to resolve the under review status as soon as possible.

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