Fitch Ratings Affirms ‘A+’ for RVI

August 7, 2005

Fitch Ratings has affirmed the ‘A+’ insurer financial strength (IFS) ratings of RVI Guaranty Co., Ltd. (RVI Guaranty) and its subsidiary, RVI America Insurance Co. (RVI America). The Rating Outlook is Stable.

Fitch’s strong IFS rating on RVI reflects the company’s dominant market position in the residual value insurance industry, conservative underwriting approach, strong capitalization, and quality management team. Partially offsetting these positives are concentration among key insureds and non-traditional capitalization.

The RVI Group is recognized as a leading provider of residual value coverage worldwide for clients that include major financial institutions (banks, finance companies, and independent lessors), equipment manufacturers, and investment banks. RVI, as a consistent, stable provider of residual value insurance coverage, has a favorable competitive position in the market.

RVI takes a conservative approach to underwriting. Policies are, for the most part, underwritten to achieve de minimis losses, net of recoveries. As a result, losses have generally been minimal, with the company reporting significant claims only twice in its history, in 2002/2003 for passenger vehicle claims and in 1998 for aircraft losses. Fitch expects the company to maintain underwriting profitability, with combined ratios of 75% or better.

Fitch considers RVI’s capitalization to be strong, albeit non-traditional, as the company has a significant unearned premium reserve (UPR) balance, a portion of which Fitch includes when measuring RVI’s true capital position.

RVI also has a sizable amount of soft capital in the form of promissory notes from wholly owned subsidiaries of Quantum Industrial Partners LDC (QIP) and CNA Financial Corp (CNA), the ultimate 50/50 owners of RVI.

Fitch considers RVI to have a high level of concentration risk, in that the top five clients accounted for 52.8% of total gross premiums written in 2004, down slightly from 54.7% in 2003, with the top client accounting for 21.0% and 17.8% in 2004 and 2003, respectively. This risk is somewhat mitigated by the fact that most key relationships are longstanding and the clients that make up the top five in any given year may vary, although the top three clients were the same in 2004 and 2003.

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