A.M. Best Affirms the Ratings of Lloyd's Syndicate 2010.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the Best's Syndicate Rating of A (Excellent) and issuer credit rating (ICR) of "a" of Lloyd's Syndicate 2010 (United Kingdom), which is managed by Cathedral Underwriting Limited. Concurrently, A.M. Best has affirmed the rating of "bbb-" to the USD 10 million and the EUR 12 million floating rate subordinated notes due 2034 issued by Cathedral Capital plc (Cathedral), the non-operating holding company of the Cathedral group of companies. The ICR of "bbb" of Cathedral has also been affirmed. The outlook for all ratings is stable.

The ratings assigned to syndicate 2010 are underpinned by the strength of the Lloyd's market. A.M. Best believes that the syndicate's relatively high reliance on third party capital providers (46% of capacity in 2006) will not restrict its development. The syndicate's capacity is likely to increase to approximately GBP 300 million (USD 561 million) in 2007, up from GBP 250 million (USD 468 million) in 2006.

The ratings also reflect A.M. Best's expectation that the syndicate will perform strongly in the open years 2004 to 2006. This period includes a near break-even result anticipated in 2005, despite the syndicate's exposure to the major events during the year from its substantial specialist property catastrophe account (approximately 40% of 2005 gross premium). In 2006 and further ahead A.M. Best believes that profits in excess of 15% of capacity are likely to be achievable subject to catastrophe experience. On an annually accounted basis, the syndicate reported a GBP 13.7 million profit (USD 23.5 million) for 2005 (compared to a GBP 29.2 million profit (USD 55.9 million) in 2004).

Syndicate 2010 continues to specialise in a restricted range of business classes, principally aviation reinsurance, non-marine property reinsurance, and direct and facultative property. The syndicate has a leadership position for approximately 45% of its core business overall and two thirds of its aviation business. The syndicate's specialist approach leads to concentration of risk but this continues to be mitigated by the syndicate's extensive reinsurance programme.

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