S&P Affirms Alliance Re ‘BBB’ Ratings

June 27, 2005

Standard & Poor’s Ratings Services announced that it has affirmed its “BBB” long-term counterparty credit and insurer financial strength ratings on Cyprus-based reinsurer Alliance International Reinsurance Public Co. Ltd. (Alliance Re) with a stable outlook.

“The ratings reflect Alliance Re’s strong capitalization, experienced management team, and risk management skills,” stated S&P credit analyst Kevin Willis. “These positive factors are offset by the company’s marginal competitive position in the global reinsurance marketplace and the lack of significant operating performance track record in its current legal form.”

S&P said the stable outlook reflects its “expectation that capitalization will be maintained at a strong level, supported by ‘AAA’ range (extremely strong) capital adequacy. The competitive position is expected to improve with time, but remains a rating constraint. Management will continue to underwrite conservatively with a globally diverse portfolio (excluding North America and with only limited risks from Western Europe).

“It will concentrate on short-tail property and marine treaty reinsurance risks, avoiding liability exposures, and will move to develop its facultative risk acceptances, especially from the Middle East and North Africa region. Operating performance will continue to improve in 2005 and 2006, as the company begins to demonstrate improved cost control through economies of scale. The combined ratio will remain below 100 percent. If premium rates deteriorate to uneconomic levels, Alliance Re is expected to withdraw from unprofitable lines to maintain positive earnings.”

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