Lloyd’s Rating Maintained

A.M. Best Co. maintained the “A-” (Excellent) financial strength rating of the Lloyd’s market after the recent announcement of a 2001 loss of GBP 3.11 billion, on an annually accounted basis. To date, Lloyd’s has accounted on an underwriting year of account basis, with each year “closed” three years after its inception. Conventional annual accounting alters the year in which premium and claims are recognized.

Key factors supporting the rating continue to be Lloyd’s excellent financial strength, strong business profile, strengthened regulatory regime and prospective improvements in operating performance. Offsetting factors include Lloyd’s poor recent performance, capital continuity disadvantages associated with the annual venture, the impact of losses arising from the U.S. terrorist attacks of September 11, 2001 and uncertainty over the ultimate adequacy of Equitas’ reserves.

A.M. Best stated that the underlying performance of the market deteriorated in the final quarter of 2001, but it remains within an expected range. Lloyd’s projections for the impact of recent losses on the Central Fund have also deteriorated, although Lloyd’s is on course to reach its target of USD 1 billion in central cash resources by December 2003. If there is a material departure from this objective, a review of A.M. Best’s rating of Lloyd’s will be triggered.

The rating agency believes Lloyd’s is likely to trade successfully through the recent period of losses, including losses arising from the U.S. terrorist attacks. It also believes Lloyd’s is in a strong position to take advantage of favorable market conditions in 2002 and the market will produce a healthy return on capital employed for the year, assuming normal loss experience.