A.M. Best Assigns Rating for Carraig Insurance Ltd.

December 18, 2003

A.M. Best Co. has assigned a financial strength rating of A- (Excellent) to Carraig Insurance Limited (Carraig) (Dublin, Ireland). The outlook is stable.

The rating reflects Carraig’s excellent risk-adjusted capitalization and very good operating performance. Offsetting factors are the inherent volatility of its liability portfolio. Carraig is the primary captive insurer of Aventis S.A. and was established in 2002 through the transfer of run-off portfolios from captives that belonged to Hoechst and Rhone Poulenc, two pharmaceutical companies that merged to form Aventis S.A.

Excellent risk-based capitalization – According to A.M. Best’s capital model, Carraig’s risk-based capitalization is excellent. Carraig was initially funded with EUR 200 million (USD 187.5 million) by its parent company, with a further EUR 300 million (USD 281 million) of authorised uncalled capital.

Very good operating performance – Carraig’s conservative underwriting and low expense ratio (4.6 percent) led to an after tax profit of EUR 31.7 million (USD 32.5 million) at year-end 2002. Nevertheless, this result was heavily influenced by a EUR 51.7 million (USD 54.1 million) reserve release from accepted run-off portfolios. Prospectively, A.M. Best expects Carraig to produce positive results, albeit somewhat lower.

Inherent volatility of Carraig’s book of business – Carraig’s book of business is comprised predominantly of pharmaceutical liability risks. The company’s decision to significantly increase its net retention in 2003 (from EUR 50 million (USD 61.5 million) to EUR 250 million (USD 308 million)) leaves it exposed to higher losses.

Dependence upon risks from parent company – As a single parent captive, Carraig writes Aventis-related risks. In its first year of operation, Carraig accepted gross written premiums of EUR 110 million (USD 115 million). A.M. Best expects a significant premium increase in 2003 (approximately 110 percent) as the transfer of the run-off portfolios is completed and the company completes its first full year of underwriting activity.

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