LEXINGTON EYES 2004 REPEAT

April 17, 2006

Lexington Insurance Group, the largest U.S.-based surplus insurance company, said it is assuming this year will look more like 2004 than 2005 as it goes about deciding where and what properties to write at what prices and terms.

In 2004, the industry lost $27 billion, compared to twice that or $55 billion in 2005. If the patterns of 2004 return this year, Lexington would make a profit, Kevin Kelly, Lexington chairman and chief executive of the American International Group affiliate, told investors during a Domestic Group Brokerage presentation.

The company plans to reduce its net coverage in catastrophe areas by 20 to 25 percent this year, targeting New Orleans and Hawaii.

Noting that the company suffered more than $2 billion in hurricane losses in 2005, Kelly said that “our market couldn’t swallow a repeat of 2005 right now.” In 2005, the company began reducing its exposure in Florida, Texas and California.

Lexington will employ a number of strategies including raising rates up to 30 percent in catastrophe-prone areas, raising wind and flood deductibles, and placing more limits on coverages to achieve better results in 2006.