A.M. Best Assigns Initial Rating to Wellington Reinsurance Limited.

Business Editors

A.M. Best Co. has assigned an initial financial strength rating of A (Excellent) to Wellington Reinsurance Limited (Wellington Re), a London-based reinsurer.

The company has been established by Wellington Underwriting plc, which owns 46.3% of the 2002 capacity of Lloyd's syndicate 2020.

The rating reflects the company's superior prospective risk-based capital base, excellent expected financial performance and prospective business profile and experienced management team. Offsetting factors include the company's limited range of specialist lines and a reliance on retrocession cover leaving it exposed to the price and availability of such protection.

Superior prospective capitalisation--Prospectively the company has a superior level of risk adjusted capital with an initial base of GBP 230 million, coupled with an irrevocable commitment for at least GBP 167 million to be fully drawn down by 30 November 2002, secured by letters of credit. The full amount of the drawn down funds will be injected into Wellington Re as additional paid up capital. Maintenance of the A rating is predicated on this second tranche of equity being in place on time and in full. A.M. Best expects Wellington Re's capitalisation, on a risk-adjusted basis, to remain at the superior level while supporting the targeted premium growth over the next three years.

Excellent expected financial performance--Wellington Re's prospective book of business, originally underwritten at Lloyd's syndicate 2020, has an excellent underwriting track record. Syndicate 2020 has consistently returned excellent underwriting results in this book, particularly on property catastrophe, as a result of a strict underwriting and business selection criteria. The same approach is to be adopted by Wellington Re. A.M. Best expects a continuation of this performance, subject to normal loss experience.

Excellent prospective business profile--A.M. Best expects a year-end 2002 net premium in excess of GBP 200 million, rising to approximately GBP 490 million in 2003. The initial portfolio will comprise a quota share participation in the business of syndicate 2020 ceded by way of a Berkshire Hathaway Inc. subsidiary. In addition, Wellington Re will provide quota share reinsurance to the new Berkshire Hathaway supported syndicate that is managed by Wellington Underwriting Agency. Both these arrangements will cease for 2003, when the company will begin to build its portfolio based on a well-established book of business currently underwritten by Lloyd's syndicate 2020. Commencing 2003, the company will also have a direct quota share agreement with syndicate 2020 under which it will accept approximately 20% of the syndicate's overall book of business. A.M. Best believes Wellington Re is in a good position to negotiate advantageous terms with brokers and reinsurers with whom they have long, established relationships.

Experienced management team--Wellington Re benefits from a highly experienced management team transferred from Wellington Underwriting Agency. A.M. Best considers the standards of management information and control procedures to be high as reflected in the historical performance of syndicate 2020.

Business concentration--A.M. Best believes that the company has a narrow focus on a limited number of specialist lines with property catastrophe and per risk representing approximately 28% of the total book in 2002 and 41% in 2003. Although some diversification is planned, it is unlikely it will have a material impact on current levels of concentration in the short term.

High reliance on retrocession cover--A.M. Best believes the company is highly dependent on the pricing and availability of retrocession cover and will closely monitor the company's maintenance of good quality retrocession cover going forward.

Expectations:

- It is anticipated the company's book of business will experience substantial growth up to 2004 fuelled by a favourable rating environment and the possible expansion into new business lines.

- In 2003, Wellington Re will enter into a direct reciprocal quota share reinsurance agreement with syndicate 2020 to further enhance the stability of its portfolio.

- Risk adjusted Capital will be maintained at a level that is highly supportive of the current rating.

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.