A.M. Best Downgrades Corifrance Rating

August 9, 2004

A.M. Best Co. has downgraded the financial strength rating to B++ (Very Good) from A- (Excellent) of Corifrance (Compagnie de Reassurance d’Ile de France) (France). The outlook is stable.

The downgrade reflects A.M. Best’s opinion of the potential negative impact on Corifrance’s business position due to the pressures arising from an increasingly global competitive market together with the absence of a strategic support from its immediate parent company, Markel International Insurance Company Ltd.

The rating also factors A.M. Best’s view of Corifrance’s lower prospective earnings. Diminished prospective business position–Corifrance writes small to medium-sized lines of business on a worldwide basis without a specific core market, although a non-negligible part of its income emanates from specialised classes and long-standing relationships. The increased competition in the global reinsurance market, where new entrants are providing more capacity and which is facing a softening of rates – particularly in property – may diminish Corifrance’s prospective business position. The company’s relatively small size (gross written premiums of EUR 29.7 million (USD 36.4 million) and EUR 33.5 million (USD 41 million) in shareholder’s funds in 2003) makes it challenging for Corifrance to lead large pieces of business in Europe or strongly influence terms and conditions.

Ownership uncertainty – Since its acquisition by Markel in 2000, Corifrance has not formed a strategic part of Markel.

Challenged prospective earnings – Corifrance’s prospective results may be negatively influenced by a reduction in property rates, a line that accounts for over 50% of the company’s total premium. In 2003, a benign claims environment and strong rates enabled Corifrance to post an after-tax profit of EUR 2.9 million (USD 3.6 million), resulting in a very good return on premiums of 20.9%.

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