Best Affirms Lloyd’s Syndicate 382 Ratings; Assigns Ratings to Hardy Underwriting Group

January 9, 2007

A.M. Best Co. has affirmed the financial strength rating of “A” (Excellent) and the issuer credit rating (ICR) of “a+” of Lloyd’s Syndicate 382, managed by Hardy (Underwriting Agencies) Ltd. (HUA). Best also assigned an ICR of “bbb” to Hardy Underwriting Group plc (Hardy Group), HUA’s non-operating holding company, and a debt rating of “bbb-” to the $30 million subordinated notes due 2036 issued by Hardy Group. The outlook for all the ratings is stable.

“The ratings reflect syndicate 382’s good operating performance, specialist business profile and the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates,” said Best.

“Syndicate 382’s financial flexibility is also enhanced by support provided by the Hardy Group, which completed its long-term goal of purchasing the remaining 9.1 percent of unaligned capital provided to the syndicate and issued $30 million floating rate subordinated notes during 2006,” Best continued. “This issue will support the expansion of the group’s underwriting through Lloyd’s Syndicate 3820, which was established for the 2007 year of account and will operate independently from syndicate 382.”

Best also expressed the opinion that “Syndicate 382 is likely to report an improved return on capacity of approximately 8 percent-10 percent for the 2006 year of account, reflecting strong property catastrophe rates, a benign hurricane season and rate softening within its aviation and financial institution accounts.”

Best said it “believes the syndicate is likely to record a good return on capacity of approximately 5 percent-7 percent in 2005, taking into account significant losses from the 2005 U.S. catastrophes (of approximately 16 percent of capacity). Although the magnitude of catastrophe losses in 2004 was lower than that in 2005, A.M. Best anticipates a similar result on capacity of approximately 6 percent-7 percent for the 2004 year of account. This reflects the syndicate’s relatively high exposure to medium-sized catastrophe events, as well as losses within its financial institution and political risk accounts.”

The rating agency also indicated that it “believes syndicate 382 benefits from a specialist business profile, writing a geographically diverse portfolio that consists primarily of aviation, marine and property short-tail risks. Syndicate 382 has maintained its capacity at £110 million ($215 million) in 2007, with growth in its direct and facultative property account offsetting the softening rating environment in its aviation and financial institution portfolios.”

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