Best Affirms Catlin’s Ratings; Outlook Now Stable; Company Comments

October 4, 2007

A.M. Best Co. has affirmed the financial strength ratings of “A” (Excellent) and the issuer credit ratings (ICR) of “a” of Bermuda-based Catlin Insurance Company Limited (CICL), Catlin Insurance Company (UK) Ltd., Catlin Insurance Company, Inc (CICI) and Catlin Specialty Insurance Company. Best also affirmed the debt rating of “bbb” of CICL’s $600 million preferred stock, as well as the ICR of “bbb” of Catlin Group Limited (CGL), which is also based in Bermuda and is the ultimate parent company of CICL, Catlin UK, Catlin Specialty and CICI.

In addition Best announced that “the outlook for all ratings has been revised to stable from negative.” The change in outlook reflects the “satisfactory resolution” of concerns about Catlin’s “integration risk following CGL’s acquisition of Wellington Underwriting Plc in December 2006,” said the bulletin.

Bests said it “anticipates that CGL will maintain its robust business retention levels and excellent performance (albeit deteriorating somewhat due to market conditions). Half year results for CGL in 2007 reflect sustained strong performance, with a consolidated net loss ratio of 55 percent representing only a modest deterioration from the aggregate net loss ratio for CGL and Wellington of 53 percent for the first half of 2006. CGL is expected to produce an excellent technical result at year-end 2007, supported by a consolidated combined ratio of approximately 90 percent-95 percent.”

In addition Best noted that it expects CICL’s consolidated risk-adjusted capitalization “to remain excellent at year-end 2007, incorporating the additional risk relating to integration of business from Wellington.” In effect “the greater part of the Catlin group’s capital is held within CICL as well as its underwriting risk, largely through intra-group quota share agreements,” Best explained. “This includes 75 percent quota shares of business written by CICL’s two US operating subsidiaries, CICI and Catlin Specialty.”

However, Best indicated that it believes the “performance of U.S. casualty business written through these subsidiaries may not meet the Catlin group’s objectives, the volume of business is expected to be insufficient to have a material adverse impact on consolidated risk-adjusted capitalization in 2007 or 2008.”

Despite the U.S. reservations, Catlin issued a press release welcoming the affirmation of its ratings and the return to a stable outlook. Chief Executive Stephen Catlin commented: “I am delighted that A.M. Best has upgraded its outlook on the Catlin’s ratings to ‘stable’. This action not only affirms our successful integration of Wellington’s operations but also attests to Catlin’s strong financial performance during the first half of 2007.”

Source : A.M. Best, Catlin –

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