A.M. Best Affirms Ratings of Catlin Insurance Companies.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating (ICR) of "a" of Catlin Insurance Company Ltd (CICL) (Bermuda), Catlin Insurance Company (UK) Ltd (Catlin UK), Catlin Insurance Company, Inc. (CICI) and Catlin Specialty Insurance Company (Catlin Specialty).

At the same time, A.M. Best has affirmed the ICR of "bbb" of Catlin Group Limited (CGL) (Bermuda), the ultimate parent company of the Catlin group, and the debt rating of "bbb" on USD 600 million preferred stock issued by CICL. A.M. Best also has affirmed the ICR of "bbb" of Catlin Underwriting (United Kingdom) and the debt ratings of "bbb-" on the USD 27 million subordinated floating rate notes and EUR 7 million subordinated floating rate notes issued by Catlin Underwriting. The outlook for all ratings remains stable.

A.M. Best believes that the Catlin group's consolidated risk-adjusted capitalisation is likely to remain strong in 2009, supported by the USD 289 million rights issue undertaken in the first quarter of 2009 and solid retained earnings. The level of consolidated risk-adjusted capitalisation is expected to be sufficient to support the group's growth plans in the United States and the increase in underwriting risk, following the termination of a 12.5% quota share reinsurance arrangement between third party Names and the group's Lloyd's operation, Lloyd's Syndicate 2003 (managed by Catlin Underwriting Agencies Limited).

The Catlin group is expected to produce an excellent consolidated pre-tax profit in 2009, underpinned by solid underwriting performance and a positive investment return. In 2008, the group reported a pre-tax loss of USD 12.6 million, owing to large investment losses and the impact of hurricanes Ike and Gustav. The combined ratio is expected to improve in 2009 (assuming normal catastrophe activity) from the 96.1% achieved in 2008. Rate increases, predominantly for catastrophe-exposed classes of business, are likely to be offset by weak rating conditions for casualty lines, increased frequency in large single risk losses and the negative impact of the global economic environment on claims frequency. A.M. Best expects prospective underwriting performance to continue to be supported by modest reserves releases and the group's robust underwriting framework, which embeds the utilisation of actuarial rating models to maintain pricing discipline.

The Catlin group ratings continue to reflect its strong profile in the Lloyd's and London markets through syndicate 2003. However, prospective growth is expected to emanate largely from the U.S. business, as the group focuses on improving its access to business that typically would not be underwritten in the London or Bermudian markets. Although this business is likely to improve the diversification of Catlin's consolidated portfolio, A.M. Best believes the group faces considerable challenges in developing profitable business in this market at a time when rates (particularly for U.S. casualty classes) remain weak.

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.