Ratings Recap: Northbridge, Fondiaria, MGIC, Trust International, First Capital, St.Paul/Travelers (UK)

October 19, 2007

Standard & Poor’s Ratings Services has placed its ‘BBB’ counterparty credit and financial strength ratings on Northbridge Financial Corp.’s operating companies–Commonwealth Insurance Co., Federated Insurance Co. of Canada, Lombard General Insurance Co. of Canada, and Markel Insurance Co. of Canada (collectively, Northbridge)–on CreditWatch with positive implications. “The ratings were placed on CreditWatch positive due to Northbridge’s better business and operating characteristics relative to other Fairfax wholly owned operating entities and its increased independence from the Fairfax group,” explained S&P credit analyst Damien Magarelli. The decision follows a “detailed review of Northbridge’s stand-alone enterprise risk management (ERM) including governance (increasing majority of independent members of board) and accounting, as well as its existing competitive profile and corporate strategy, related to Northbridge’s majority owner Fairfax Financial Holdings Ltd.,” said S&P

Standard & Poor’s Ratings Services has assigned its ‘BBB-‘ junior subordinated debt rating to the proposed perpetual, fixed/floating-rate notes soon to be issued by Fondiaria-SAI SpA (BBB+/Positive/–). “The debt rating is based on the assumption that the actual note issue will, for all material purposes, be consistent with the advance information provided to Standard & Poor’s in order to undertake its analysis,” said the bulletin.

Standard & Poor’s Ratings Services has placed its ‘AA’ counterparty credit and financial strength ratings on Mortgage Guaranty Insurance Corp., MGIC Indemnity Co., and MGIC Australia Pty Ltd. (collectively referred to as MGIC) on CreditWatch with negative implications. S&P also placed its ‘A’ counterparty credit rating on MGIC Investment Corp. on CreditWatch with negative implications. “These rating actions follow today’s announcement by MGIC Investment Corp. (MGIC Investment) that its loss ratio rose to 188 percent in the third quarter of 2007,” indicated S&P credit analyst James Brender. “Standard & Poor’s primary concern is MGIC’s operating performance in the next two years. We expect that MGIC will report underwriting losses in 2007 and 2008.”

Fitch Ratings has affirmed the ‘AA’ Insurer Financial Strength (IFS) ratings of Mortgage Guaranty Insurance Corporation (MGIC) and MGIC Australia Pty Ltd. (MGIC Australia) and the ‘A’ senior debt rating of MGIC Investment Corporation (MGIC Investment). However, Fitch also revised its rating outlook for all entities to negative from stable.

Standard & Poor’s Ratings Services has assigned its ‘BBB’ long-term counterparty credit and insurer financial strength ratings on Bahrain-based non-life reinsurer Trust International Insurance Co. B.S.C. with a stable outlook. “The ratings reflect Trust International’s strong capitalization, strong operating performance, and good competitive position,” stated S&P credit analyst Nigel Bond.

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating of “a-” of Singapore-based First Capital Insurance Ltd. with a stable outlook. “The ratings reflect First Capital’s improved capitalization, stable underwriting performance and liquid investment portfolio,” said Best.

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of the UK-based St. Paul Travelers Insurance Company Limited with a stable outlook. “The ratings reflect SPTIC’s excellent risk-adjusted capitalization and operating performance as well as its strong UK business profile,” said Best. “The ratings also factor in explicit parental support in the form of a guarantee in respect to all SPTIC’s liabilities provided by St. Paul Fire and Marine Insurance Company, a subsidiary of SPTIC’s ultimate parent, The Travelers Companies, Inc.”

Source: S&P, Fitch, A.M. Best

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