Best Affirms Rating for Lloyd’s Syndicate 2010

April 20, 2005

A.M. Best Co. has affirmed the Best’s Syndicate Rating of A (Excellent) and issuer credit rating (ICR) of “a” of Lloyd’s Syndicate 2010 (United Kingdom), which is managed by Cathedral Underwriting Limited.

At the same time, A.M. Best has assigned a rating of “bbb-” to the USD 10 million and EUR 12 million (USD 15.5 million) of floating rate subordinated notes due 2034 issued by Cathedral Capital plc (Cathedral), the non-operating holding company of the Cathedral group of companies. A.M. Best has also assigned an ICR of “bbb” to Cathedral. The outlook for all ratings is stable.

The syndicate has maintained its strong underwriting profile for its portfolio of predominantly short-tail aviation and regional North American property catastrophe business. A.M. Best anticipates that in 2005, approximately 45% of the syndicate’s business by premium volume will be written from a leadership position.

The syndicate is likely to produce strong overall earnings, with A.M. Best projecting a profit on capacity (after personal expenses) of approximately 20% in 2003 and 10% in 2004 despite the high incidence of catastrophes in the second half of the year. This level of performance is achievable due to the specialist nature of its portfolio, the high level of control over pricing and the terms at which business is written, together with a largely stable rating environment despite reducing from the peaks seen in 2002 and 2003.

A.M. Best believes the syndicate will seek to maintain the support of its third-party capital providers (representing 46% of allocated capacity in 2005), although financial flexibility could be impacted should there be a reduction in this source of capital.

Nonetheless, A.M. Best believes syndicate 2010’s strong operating performance would likely enable the syndicate to raise additional funds should the need arise.

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