A.M. Best Affirms Rating of Heddington Insurance Limited.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 17, 2003

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of Heddington Insurance Limited (Heddington) (Hamilton, Bermuda). The rating outlook is stable.

The rating reflects Heddington's superior capitalization, consistently positive operating results and the role that the company plays as a captive insurance company for its ultimate parent, ChevronTexaco Corporation (NYSE:CVX). The rating is based on the consolidated results of Heddington as well as its subsidiary, Heddington Insurance (U.K.) Limited (London, United Kingdom).

The rating further acknowledges risk management programs and underwriting coordination in the design and implementation of insurance policies offered by Heddington, as well as the cost effective manner in which those services are delivered. Heddington gains from its parent's global scope, which provides a favorable geographic distribution of risks assumed.

These positive rating factors are partially offset by the company's high net loss exposures as the coverages provided tend to result in claims that are characterized as low frequency but high severity. This is somewhat mitigated by its excellent loss history and ChevronTexaco's record of supporting Heddington's strong surplus position. Furthermore, the majority of its invested assets are in the form of loans to affiliated companies. Although this leads to a concern regarding concentration of risk within the same organization, the loans are reviewed by and have been authorized as admitted assets by the local regulatory authorities and are deemed secure.

Another area of concern is the substantial amount of assets placed in oil and gas exploration activities. These are considered illiquid for purposes of claims payment obligations. Nonetheless, excluding these assets from the total investments, Heddington still has sufficient resources to meet its underwriting related obligations as measured by A.M. Best's capital adequacy model.

In its role as a captive insurer, Heddington provides broad and competitive global insurance products for ChevronTexaco and its subsidiaries. The merger between Texaco Inc. and Chevron was completed on October 9, 2001. The near term insurance needs of Texaco and Chevron are still being supplied through their respective captives (Heddington, Bermaco and Traders) and the commercial market. However, much of the insurance arrangements for the parent have been rationalized among the captives to enhance operating efficiencies. Heddington provides comprehensive coverage above ChevronTexaco's internal retentions, while its reinsurance is placed through a corporate wide plan with the world's significant providers of capacity, resulting in a diversified and balanced distribution of reinsurers.

In 2002, ChevronTexaco Corporation had worldwide revenues of USD99.0 billion and net income of USD1.1 billion. With the company's 33 years of experience in providing capacity and insurance services to Texaco and its affiliates and now ChevronTexaco, A.M. Best believes Heddington is in an excellent position to serve as one of ChevronTexaco's insurance and reinsurance capacity providers.

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's 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.