A M Best Press release of 22 August 2002

THE RELEASE BELOW IS FOR INFORMATION PURPOSES ONLY
A M Best affirm their A- (Excellent) rating of Brit Insurance Limited. The outlook is stable.
August 22, 2002


For Immediate Release

A.M. Best Affirms Rating of Brit Insurance Limited
OLDWICK, NEW JERSEY, U.S.A, Aug. 20, 2002-A.M. Best Co. has affirmed the A- (Excellent) rating of Brit Insurance Limited. The outlook is stable.

The rating is based on the company's continued excellent capitalisation and liquidity levels, good underlying operating performance, improving business position and diversification, and the strength of its management and underwriting teams. The conservative estimation of exposure to the World Trade Center loss gives a clear indication of management's cautious stance to reserving. Offsetting factors include Brit's modest market profile and low level of diversification by business line which can result in volatile financial performance due to the high dependence on property catastrophe business.

Excellent capitalisation: The A.M. Best risk-based capital model incorporates factors such as the company's exposure to high-risk lines, high but reducing dependency on reinsurance and lack of diversification. At year-end 2001, policyholders' surplus of GBP 70.6 million (USD 102.5 million)-adjusted for equalisation provisions-supported a low volume of earned premium at GBP 20.5 million (USD 29.8 million).

Excellent liquidity: Brit maintains minimal exposure to equity markets at 2.7% of current invested assets, with the majority of its investments held in cash and cash equivalents. Liquidity levels remain excellent and would allow a small increase in exposure to equities, which -MORE-
is currently under consideration.

Continued good underlying operating performance: Market conditions are currently highly favourable for catastrophe retrocession and excess of loss lines, which form the mainstay of Brit's account. Assuming an average loss frequency for large catastrophe events, A.M. Best expects Brit to achieve a double digit post tax ROE in 2002 to 2004, recovering from an after-tax loss in 2001 of GBP 9.4 million (USD 13.6 million) resulting from exposure to the World Trade Center disaster. The impact of hardening rates on outward reinsurance protection has been partly mitigated by the long-term nature of several of the current outward protections and reduced reliance on reinsurance protection due to improved terms and reduced level of exposure on inwards business.

Improving business position and diversification: Brit remains largely reliant on two main business lines, catastrophe and financial risks. However, the range of business lines written is likely to increase in the next 12 to 24 months as some lines of business currently written by the Brit Syndicate 2987 are allocated to the company. The level of diversification by client has increased significantly over the last two years and a much broader and well-balanced spread of broker and retrocessional support has been achieved.

Strong management and underwriting team: A.M. Best believes Brit benefits from the management team's considerable knowledge and experience of the business lines written and tight controls over underwriting. Standards of management information and corporate governance in all aspects of the business continue to be high.
Expectations:

Prospectively, A.M. Best expects surplus to increase through retained earnings, increased equalisation provisions and potentially through further allocation of capital from the company's parent, Brit Insurance Holdings PLC. The company is expected to remain committed to maintaining an excellent level of capitalisation as measured on a risk-based adjusted basis.

The company will continue with its product line diversification plan by introducing new lines of business in the next twelve months. These will require a substantial increase in capital which the holding company is currently researching.

In the absence of further extraordinary catastrophic events, A.M. Best expects the company to return to profitability in 2002 and 2003, benefiting from the much improved rating environment which should also assist Brit in its plan to achieve further growth in overall business volume in the next three years.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.

Contacts:
Public Relations
Jim Peavy
james.peavy@ambest.com
(908) 439-2200, ext. 5644

Rachelle Striegel
rachelle.striegel@ambest.com
(908) 439-2200, ext. 5378

Analyst
Alison Stringer
alison.stringer@ambest.com
+(44) 20 7626 6264

Miles Trotter
miles.trotter@ambest.com
+(44) 20 7626 6264
 
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