Fitch Lowers Exporters’ IFS to ‘A-‘; Outlook Stable

January 27, 2005

Fitch Ratings has lowered the insurer financial strength (IFS) rating on Exporters Insurance Company Ltd., a Bermuda-based group captive insurer that focuses on trade credit insurance, to ‘A-‘ from ‘A’. Fitch, however, assigned a stable outlook to the new rating. Its previous outlook had been negative.

“Fitch’s rating action reflects its view that, due to the company’s high gross exposure and increasing net exposure of the insured portfolio relative to its small capital size and volatile underwriting results inherent in the trade credit line of business, it is more consistent within Fitch’s rating parameters to rate the company at the ‘A-‘ rating level,” said the announcement. “The rating action also reflects Fitch’s concerns with regard to the overall declining credit quality and increased concentration risk of Exporters’ reinsurance program, given the company’s significant dependence on reinsurance.”

Fitch also noted: “Exporters recently resolved a significant uncertainty with regard to the company’s capital structure, which had been under review by Exporters since late in 2003. On Jan. 5, 2005, Radian Group, Inc. announced the sale of its entire interest (36 percent ownership, 53 percent voting) in EIC Corporation Ltd. (EIC; parent of Exporters) to Island Partners LLC, an affiliate of Ecoban Finance Limited, created in December 2004 solely to acquire EIC. As a result, Ecoban now has a controlling interest in Exporters, increasing its 36% ownership (6% voting) in EIC to 72 percent voting ownership.

“At the same time, Exporters replaced its president and CEO, Robert E. Svensk, with Frank T. Buziak, formerly president and CEO of Facility Insurance Corp., a Swiss Re subsidiary. No other changes were made to the staff.

“Fitch expects that Ecoban will be fully supportive of Exporters and the current experienced senior management team as they continue to operate and expand within the business of providing credit and political risk insurance. Nevertheless, the recent departure of Mr. Svensk, one of the company’s founders, highlights the key man risk inherent in a company of Exporters’ size.

“Fitch’s strong rating and Stable Outlook on Exporters continues to reflect the company’s competitive niche position in offering a valued insurance product, conservative investment portfolio, with essentially zero exposure to equities, and increased investment by new and existing members.

“The strong rating and Stable Outlook also reflects improved operating results, as Exporters posted operating profits in 2003 and 2004. This followed operating losses in 2002 and 2001 that were driven by poor underwriting performance due to several large event losses in the 2001 accident year, related to the financial crisis in Argentina and a telecommunications exposure, which affected 2002 and 2001 calendar year results. “

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