A.M. Best Assigns Financial Strength Rating to SCHWARZMEER UND OSTSEE Versicherungs-Aktiengesellschaft SOVAG.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--May 8, 2003

A.M. Best Co. has assigned a financial strength rating of B++ (Very Good) to SCHWARZMEER UND OSTSEE Versicherungs-Aktiengesellschaft SOVAG (Sovag), Hamburg, Germany. The outlook is stable.

The rating reflects Sovag's excellent risk-adjusted capitalisation, very good underwriting performance and very good business position in its niche markets. An offsetting factor is the difficult business and regulatory environment in the countries where Sovag writes risk, which ultimately could negatively affect its market profile. The rating takes into account that Sovag is controlled by the Russian insurer, Ingosstrakh.

Excellent capitalisation--Sovag's risk-adjusted capitalisation is excellent based on A.M. Best's capital model. A.M. Best expects Sovag's capital base to remain sufficient to support its current business plans. Sovag's main shareholders have provided funds in the past and A.M. Best believes that they would inject further capital if necessary.

Very good underwriting performance--In the last five years, Sovag has consistently produced technical profits and achieved a combined ratio of 94.4% in 2002. Although an improvement from 98.4% in 2001, it is higher than the five-year average of 92.5%. Despite a further decline in investment income due to unrealised losses, pre-tax profits are expected to improve.

Very good business position--Sovag has established itself as a specialist insurer for risks related to Russia and the Confederation of Independent States (CIS). Initially writing solely marine insurance, Sovag has opportunistically diversified into other classes of business, such as motor liability insurance (in particular short-term Green Card contracts) and niche reinsurance.

Russian ownership--Ingosstrakh, one of the largest insurers in Russia, has been Sovag's major shareholder (45% of ownership) for more than 55 years. Ingosstrakh regards Sovag as a vehicle to expand its franchise outside Russia. In accordance with the German insurance supervisory law, Sovag is regulated by the German financial services authorities (BAFIN) and assets are sufficiently protected to meet policyholders' claims. Sovag has never experienced difficulties in recovering reinsurance receivables from Ingosstrakh, even during monetary restrictions imposed by the Russian government in 1991.

Expectations:

-- A.M. Best expects Sovag to continue its conservative

underwriting strategy in its niche markets. The combined ratio

is to remain below 100% in 2003.

-- Sovag's risk-adjusted capitalisation is expected to be

maintained at an excellent level.

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.