A.M. Best Affirms Rating of Through Transport Mutual Insurance Assoc.

June 10, 2003

A.M. Best Co. has affirmed the financial strength rating of B+ (Very Good) of Through Transport Mutual Insurance Association (TT Bermuda), Bermuda. TT Bermuda’s consolidated accounts include its wholly owned subsidiary, Through Transport Mutual Insurance Association (Eurasia) Limited (TT Eurasia), United Kingdom. These two companies collectively trade as TT Club, although the rating only applies to TT Bermuda. The outlook remains stable.

The rating reflects the improvements in the company’s consolidated risk-based capitalization, financial performance and stable reserve development in 2002.

Improvement in risk-based capital – The Club’s risk-based capital – as measured by A.M. Best’s model – has improved since year-end 2001, benefiting from a variable quota share reinsurance policy with Swiss Reinsurance Company (United Kingdom) Limited and another Superior-rated reinsurer for the years 2002-2004. The Club also entered into a finite quota share arrangement for 10.5 percent of gross premiums with Swiss Re in 2002. Although reinsurance gearing has increased, these arrangements enhance the Club’s financial flexibility, enabling it to take advantage of the current favourable rating environment. The Club has adopted a more conservative investment approach (short-dated bonds and cash) and is no longer exposed to equities.

Positive trend in financial performance – During 2002, TT Club’s consolidated financial performance improved significantly, leading to a USD 10.7 million profit after tax (2001 year-end loss of USD 40.3 million). The Club has restructured its portfolio, ceasing to write risks associated with small ships and reducing the business written through global agency agreements by 90 percent. In addition, stricter underwriting controls, a USD 8.7 million reserve release and rate increases of 40 percent on average contributed to the 2002 positive result. TT Club continues to implement rate increases (26 percent average in 2003 to date).

The Club will remain in surplus in 2003 and 2004, subject to normal loss experience, benefiting from management’s focus on underwriting policy.
Risk-based capitalization will not significantly deteriorate below the current level, as measured by A.M. Best’s capital model.

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