A.M. Best Affirms Rating of Energy Insurance Mutual Limited.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 14, 2003

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of Energy Insurance Mutual Limited (EIM) (Bridgetown, Barbados). The rating outlook is stable.

The rating reflects EIM's excellent capitalization, historically strong operating returns and conservative leverage position. These positive rating factors are derived from EIM's specialized expertise in providing insurance and risk management information and services to its members, as well as its ability to generate business opportunities through its niche market strategy. EIM has accomplished a very favorable retention pattern, which has been consistently near 100% since inception.

Somewhat offsetting these positive rating factors is volatility in the company's reported underwriting results. EIM's position as an excess insurer leaves it subject to low frequency, high severity claims. In 1998 and 2000, significant underwriting losses resulted from reported claims and reserve strengthening. EIM has considerable volatility of earnings and uncertainty remains with regards to exposures emanating from EIM's directors and officers (D&O) coverages. In addition, EIM's investment portfolio has experienced unrealized losses due to the downturn in equity values. Nonetheless, A.M. Best believes that the company's excellent capitalization and strong balance sheet are more than adequate to provide for its obligations. Furthermore, initial financial reports for 2003 indicate favorable results in underwriting and investments.

EIM remains focused on providing excess general liability and excess D&O liability coverage to approximately 170 utilities and energy companies. As a result of the types of losses sustained recently in the D&O and general liability lines, EIM has isolated the fiduciary liability component and offers it as a separate coverage to members. The member companies are primarily gas and electric utilities headquartered in the United States, Canada, the United Kingdom and Germany. Moreover, as some of the members have grown, the distribution of exposures covered by the captive has spread geographically. In response to the diversification exhibited by many of its members and to provide EIM's service to a broader range of clientele, the company has extended membership privileges in limited circumstances to companies engaged in related utility services industries as well as telephone and water companies. Risk diversification is enhanced through property insurance coverage options available to members via two alliances EIM has with other insurers. EIM has increased premiums substantially in the general liability line and even more so in the D&O coverage in order to fulfill its obligation to maintain a strong claims paying ability and to increase surplus to support growth, broader policy offerings and enhanced member services.

EIM remains committed to growth in capital and surplus, a well diversified investment portfolio and a focus on the long-term stability of the organization for its participants. A.M. Best anticipates that EIM will continue to produce profitable overall operating results, exhibit strong member retention and maintain solid capitalization levels.

A.M. Best has rated captive insurers since the 1980s. Over the past five years, A.M. Best has increased coverage of this rapidly growing sector and now rates more than 300 captive insurance entities.

The A.M. Best Captive Center, a perfect complement to the agency's interactive rating service, provides the most extensive array of captive information available, including Best ratings, news, special reports and industry data.

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.