A.M. Best Affirms Ratings of Converium AG.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of B++ (Very Good) and issuer credit rating (ICR) of "bbb+" of Converium AG (Switzerland) and its main subsidiaries (collectively referred to as Converium Group or Converium). The outlook for all ratings remains stable. (See below for a list of affected ratings.)

Converium's ratings reflect its very good risk-adjusted capitalisation, a gradual anticipated recovery in performance and good client retention in its core markets in Continental Europe. Offsetting factors are the continuing potential for reserve volatility and some uncertainty as to strategic direction caused by the absence of permanent executive managers in certain key roles within the company.

In 2005 and 2006, A.M. Best anticipates that Converium will maintain very good risk-adjusted capitalisation supported by reduced business volumes and contributions from net retained earnings. In A.M. Best's view, however, the company's risk-adjusted capitalisation is adversely affected by the potential for volatility in its reserves, despite the substantial reserve additions made in 2004 and the company's successful commutations programme. With the ratio of net technical reserves to non-life net premiums written likely to increase sharply to over 450% in 2005 (up from 284% in 2004), a relatively modest reserve movement has the potential to have a significant impact on the company's performance.

A.M. Best believes that Converium is likely to return to profit in 2005 (anticipated net income in the region of USD 40 million), reflecting an improvement in its non-life loss ratio to approximately 80%-85%, down from 90.3% in 2004. However, A.M. Best anticipates that Converium's performance will be adversely affected by a marked increase in its operating expense ratio to nearly 40% in 2005, driven by a reduction in consolidated net premiums written of 45% to approximately USD 2 billion. In 2006, A.M. Best believes that the benefits of Converium's cost reduction programme will lead to a decrease in the company's operating expenses to a more manageable level (anticipated reduction to between 30%-35%). The high hurricane activity in 2005 is unlikely to have a major impact on Converium, reflecting the company's reduced exposure in North America.

Outside the United States, A.M. Best believes that Converium maintains strong relationships with its clients (87% of direct client relationships retained through the 2004-2005 renewal season). Converium's involvement with business written through the Medical Defence Union and Global Aerospace Managers Ltd in the United Kingdom is expected to continue, with these two sources of business likely to form approximately 50% of the company's specialty account gross premium written in 2005.

The FSR of B++ (Very Good) and ICR of "bbb+" has been affirmed for the following companies:

--Converium AG

--Converium Rueckversicherung (Deutschland) AG

--Converium Insurance (UK) Limited

The ICR of "bb+" of Converium Finance S.A. has been affirmed.

The debt rating of "bbb-" has been affirmed as follows:

Converium Finance S.A. (guaranteed by Converium Holding AG and Converium AG)--

--USD 200 million 8.25% guaranteed subordinated notes, due December 2032

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

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.