Best Affirms Rating for London Life and General Reinsurance Company; Outlook is Stable

December 17, 2004

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of London Life and General Reinsurance Company Limited (LLGRC) (Ireland), and assigned an issuer credit rating (ICR) of “a+” to the company. The outlook for both ratings is stable.

The ratings reflect LLGRC’s excellent current and prospective risk-adjusted capitalization, factoring in the likelihood that the company will not make a dividend payment to its parent at year-end 2004. A.M. Best believes the company’s immediate parent, London Reinsurance Group Inc. (LRG), and ultimate parent, Great West Life Assurance Company, remain committed to the company, providing additional financial flexibility should it be required.

LLGRC has a solid business position writing tailor-made specialist property and casualty and life reinsurance products on both a traditional and finite basis, working closely with LRG and other group subsidiaries to structure transactions on the most efficient basis.

A.M. Best believes the company will focus on these core products from 2005, following the anticipated transfer of its discontinued lines (aggregate excess of loss) to an affiliated company before year-end 2004. Premium income has varied significantly in recent years due to the nature of the financial risks written by LLGRC. The size of individual financial contracts written can vary significantly, making it difficult to project year-end premium volume.

Nevertheless, A.M. Best anticipates a significantly higher gross premium income at year-end 2004–at approximately CAD 1.2 billion (USD 970 million)–resulting from the addition of a number of life finite contracts in the first half of 2004.

A.M. Best believes LLGRC is likely to produce consistent operating profits in 2004 and 2005, benefiting from the longer-term relationships it has developed with its core clients. A 2004 combined ratio largely comparable to 2003 (102.7%) is anticipated, together with a marginally higher investment return of approximately 8%.

The improvement in investment return is forecast as a result of a general review of investment policy which led to an increase in higher yield fixed income securities as against cash and deposits.

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