A.M. Best Affirms FSR of Brit Insurance Limited; Withdraws Rating on Brit Insurance -UK- Ltd.

September 9, 2003

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of Brit Insurance Limited (BIL) (United Kingdom) and removed the rating from under review based on BIL’s August underwriting plans. The outlook is now stable.

At the same time, A.M. Best has withdrawn the financial strength rating of A- (Excellent) of Brit Insurance (UK) Limited (formerly Professional Risks Insurance Limited) and assigned it an NR-3 (Rating Procedure Inapplicable), following the cessation of underwriting. The rating action on BIL reflects the August approval by the board of directors of both BIL and Brit Insurance (UK) Limited (Brit UK) to stop loss contracts allowing access to capital between the two companies.

The rating was placed under review with negative implications when BIL’s parent company, Brit Insurance Holdings PLC, announced a potential share offer for Professional Risks Insurance PLC. In addition, BIL’s financial strength rating reflects the company’s excellent capitalization and performance prospects, its improved underwriting diversification and raised business profile. An offsetting factor is the company’s growth plans, which include the risks inherent in commencing underwriting several new classes of business.

A.M. Best expects BIL to maintain its excellent risk-based capitalization, despite an anticipated increase in net written premium for 2003 of nearly 240 percent to approximately GBP 368 million (USD 590 million) and a further planned increase of approximately 60 percent in 2004. The amount of paid-up capital available to BIL has increased from GBP 150 million (USD 241 million) to GBP 270 million (USD 433 million), incorporating capital from Brit UK, which has now ceased underwriting. Explicit access to capital between BIL and Brit UK and vice versa is achieved through whole account stop loss contracts that are triggered excess of a net combined loss ratio of 100 percent. Both contracts are subject to three months notice to A.M. Best.

A.M. Best expects BIL’s performance to be excellent, building on the substantial net income of GBP 28 million (USD 45 million) recorded in 2002, although loss ratios will inevitably increase from 62 percent in 2002 now that a diversified account of direct business is written in addition to the low loss frequency catastrophe account which previously dominated BIL’s underwriting. A.M. Best believes BIL will be able to take advantage of the favorable underwriting conditions that currently prevail in the direct market in the UK, particularly for long-tail casualty lines. A combined ratio of below 100 percent is expected in 2003, subject to normal loss experience.

A.M. Best believes that BIL’s profile has been enhanced by its increased capitalization and enlarged portfolio of business, including both business transferred from syndicate 2987, managed by Brit Syndicates Ltd, and start-up portfolios developed by newly recruited underwriters. Particularly strong advances have been made in small- to medium-sized commercial lines in the UK, which is a target sector for BIL.

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