S&P Raises Pacific Century Ratings on Fortis Takeover

June 15, 2007

Standard & Poor’s Ratings Services has raised its insurer financial strength and counterparty credit ratings on Hong Kong’s Pacific Century Insurance Co. Ltd. (PCI) to “BBB+” from “BBB-.” S&P also raised its rating on PCI Capital Ltd.’s US$100 million 10-year unsecured 5.875 percent notes due 2014 guaranteed by PCI to “BBB” from “BB+.”

Following the ratings action, S&P removed the ratings from CreditWatch, where they were placed with positive implications on March 1, 2007 after Fortis Insurance International N.V. announced its intention to acquire PCI’s immediate holding company, Pacific Century Insurance Holdings Ltd. (PCIH). PCI is a wholly owned subsidiary of PCIH. S&P noted that Fortis had “acquired 98.59 percent of PCIH on June 11, 2007 and plans to increase its stake to 100 percent through the compulsory acquisition of the remaining shares.” The ratings outlook is now positive.

“The upgrade reflects implicit support from the financially strong Fortis insurance group, as well as PCI’s improved standalone credit profile in recent years, which includes expanded business lines and enhanced operating performance,” stated S&P credit analyst Connie Wong. “The ratings continue to reflect the company’s strong capitalization.”

In addition S&P noted that the “credit profile of PCI benefits from the strong capitalization of the PCIH group. PCIH’s capitalization is likely to remain strong in 2007, despite its increased exposure to investment properties.

“The insurer’s operating performance is satisfactory. The company’s return on average assets (ROAA) was 5.9 percent in 2006 from 0.6 percent in 2005. The significant improvement in 2006 was partly because of increased investment profits. PCIH’s annualized ROAA was 4.0 percent in the first quarter of 2007.”

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