Best Affirms FSR for Glacier Re

January 23, 2006

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-“of Glacier Reinsurance AG (Glacier Re) (Switzerland). The outlook for both ratings remains stable.

A.M. Best believes that Glacier Re is likely to maintain its strong risk-adjusted capitalization despite the impact of recent U.S. hurricane losses, which are expected to result in a significant net loss for the 2005 financial year. Capital has been re-built with an injection of USD 100 million from the company’s principal investors in October 2005 and further enhanced by the issuance of subordinated bonds for USD 34 million and EUR 14 million (USD 16 million) in December 2005.

In 2006, A.M. Best anticipates that a hardening of rates for most of the lines underwritten by Glacier Re is likely to result in substantial underwriting opportunities for the company. A.M. Best believes that Glacier Re is likely to generate strong earnings (anticipated combined ratio below 70% in 2006), although its underwriting performance is subject to significant volatility due to the nature of the risks written, which includes a substantial exposure to natural catastrophes.

A.M. Best believes that Glacier Re has established a diversified book of business in its first year of operation, including property catastrophe reinsurance, retrocession and marine and aerospace reinsurance. The company’s gross written premium is likely to be approximately USD 250 million in 2005, rising to about USD 350 million in 2006 due to increases in rates and new contracts.

An offsetting factor is the company’s reliance on retrocessional protection. A.M. Best believes that the availability of retrocessional coverage to Glacier Re is likely to be restricted in 2006 and may therefore be an inhibiting factor in the company’s development.

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