A.M. Best Affirms Ratings of Catlin Insurance Company Limited (CICL).

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 Limited (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 CICL, Catlin UK, CICI and Catlin Specialty, and the rating of "bbb" on the 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-" of the USD 27 million subordinated floating rate note and EUR 7 million subordinated floating rate note issued by Catlin Underwriting. The outlook for all these ratings remains stable.

A.M. Best believes that CICL will maintain excellent consolidated risk-adjusted capitalisation in 2008, supported by good retained earnings. In A.M. Best's analysis of CICL's consolidated risk-adjusted capitalisation, the retained earnings will largely offset the net impact of premium income growth of approximately 15% in 2009, emanating from the cessation of third party Names participation on Lloyd's Syndicate 2003 (through a 12.5% quota share reinsurance arrangement on the 2007 and 2008 years of account).

A.M. Best anticipates good consolidated pre-tax profits in 2008, albeit lower than the USD 571 million achieved in 2007. Good underwriting performance is anticipated, despite a higher consolidated combined ratio than the 81% achieved in 2007, as a result of the softening rating environment and the impact of hurricanes Gustav and Ike. Underwriting results are likely to be supported by CICL's prudent reserves and comprehensive reinsurance programme, in addition to the group's strong underwriting framework, which embeds the use of actuarial support and technical models to sustain pricing discipline. However, investment income in 2008 is likely to be adversely affected by the impact of weak economic conditions on investment markets. The consolidated operating expense ratio is expected to be higher than the 35% achieved in 2007, as expansion in the U.S. and international markets continues. However, the group is expected to benefit from further operating cost synergies arising from the acquisition of Wellington Underwriting Plc (WU) in 2006.

The Catlin group continues to enhance its profile (post acquisition of WU) through the growth of its U.S. subsidiaries and the expansion of its offices within the international market. This strategy is likely to give the group access to business that would not typically be placed in the London or Bermudian market. However, whilst growth in the U.S. will increase the diversification within the consolidated portfolio, A.M. Best is concerned that this growth comes at a time when market conditions are deteriorating.

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.