S&P’s Rates D.A.S. Legal Expenses Insurance A+

May 1, 2003

Standard & Poor’s has assigned its ‘A+’ long-term counterparty credit and insurer financial strength ratings to U.K.-based legal expenses insurance (LEI) underwriter D.A.S. Legal Expenses Insurance Co. Ltd. (DASUK). The outlook is negative.

“The ratings reflect the company’s strategic importance to Germany-based reinsurance and insurance group Munich Re (core companies of which are rated AA-/Negative/–), as well as its strong historic operating performance, strong and defendable business position in the niche LEI market, and good level of capitalization,” said Standard & Poor’s credit analyst Wolfgang Rief. These strengths are partly offset by the company’s risk concentration in the relatively small LEI market – mainly in the U.K. – and its dependence on external sources of distribution.

DASUK, the largest legal expenses provider in the U.K., is wholly owned by D.A.S. Deutscher AutomobilSchutz Allgemeine RechtsschutzVers.-AG (DASG; A+pi/–/–), which, including its group companies, is the European leader in LEI, with annual premium income of more than GBP500 million ($818.3 million). DASG, in turn, is part of ERGO group, Germany’s second-largest insurance group, with premium income of more than GBP11.9 billion. ERGO is owned by the world’s largest reinsurer, Munich Reinsurance Co. (MRC; AA-/Negative/–).

The negative outlook on DASUK reflects the negative outlook on DASUK’s ultimate parent, MRC. “DASUK’s stand-alone evaluation reflects Standard & Poor’s expectation that DASUK’s overall financial and risk profiles will remain materially unchanged,” said Rief.

This evaluation incorporates the following expectations: DASUK will continue to maintain its leadership position in the U.K. LEI market; gross income will exceed GBP75 million (including noninsurance income of GBP9 million) in 2003; DASUK’s risk profile will remain unchanged; its after-the-event business segment (that is, business where an LEI policy is taken out only after the incident has occurred) is not expected to represent more than 10 percent-15 percent of net premium income in 2003; DASUK will maintain overall profitability in 2003 (DASUK is targeting a pretax gross result of GBP4.6 million in 2003); and capitalization will be maintained at levels at least similar to 2002.

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