A.M. Best Affirms Ratings of Revios Rueckversicherung AG.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Revios Rueckversicherung AG (Revios) (Germany). The outlook for both ratings is stable.

The rating reflects the company's good but deteriorating risk-adjusted capitalisation, its stable financial performance and stable but uncertain business profile.

A.M. Best believes that Revios' prospective risk-adjusted capitalisation is likely to come under pressure due to premium growth and deferred acquisition cost (DAC) increases. Capital and surplus is expected to increase further in 2005 due to stable profits and a continuing no-dividend policy. The strain from the provision of letters of credit (LOC) to cover the U.S. XXX reserve gap is likely to decrease over time following Revios' decision to replace a large proportion of letters of credit with reinsurance.

A.M. Best anticipates Revios' financial performance will stabilise. Operating expenses over the next two years are likely to increase as a combined effect of increased infrastructure investments (mainly in information technology and human resources) and reduced costs of outsourcing and acquisition expenses. A.M. Best believes gross written premiums will grow by 5% per year. Revios' retention levels are likely to increase, resulting in a net written premium growth of about 7% per year. This will counteract the company's increasing operating expenses and result in a stable pre-tax profit in the next two years.

A.M. Best believes that the uncertainty over the future ownership of Revios is a weakness that will have an impact on the potential growth of the company.

For 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.