A.M. Best Assigns Ratings to Polish Re.

OLDWICK, N.J., U.S.A. -- A.M. Best Co. has assigned a financial strength rating of B+ (Very Good) and an issuer credit rating of "bbb-" to Polskie Towarzystwo Reasekuracyjne S.A. (Polish Re) (Poland). The outlook is stable.

The rating reflects the company's good risk-adjusted capitalisation, good domestic business profile and good but modest operating performance. Offsetting factors are the company's limited geographical diversification and high business dependence upon one client.

Good risk-based capitalisation--Polish Re's risk-adjusted capitalisation is supportive of the company's business strategy and planned growth for the next two years. A.M. Best expects the capital base to marginally improve from retained earnings.

Good domestic business profile, but limited geographical diversification--Polish Re is the main reinsurance company in Poland but lacks a strong presence abroad. The company has no plans to become a global reinsurer, but it intends to gradually further penetrate Central and Eastern European markets by capitalising on the region's cultural affinities. After a two-year decline, total gross premium grew 40% in 2003. However, A.M. Best is concerned that one cedant (Polskie Towarzystwo Ubezpieczen S.A. (PTU)) accounts for approximately 45% of the gross premiums. In addition, the overall business mix is highly biased toward motor business, of which approximately 55.6% relates to PTU. Polish Re is actively increasing the share of its property lines to balance its portfolio and, in turn, to reduce PTU's business concentration.

Good but modest technical performance--A.M. Best expects Polish Re's technical performance to slightly deteriorate in the next two years as a result of increased operational costs due to the planned geographical expansion. Therefore, despite some improvements in its loss ratio (70.6% in 2003 and 70% expected in 2004), the combined ratio (98.2% in 2003) is likely to stabilize at around 100% over the next two years. Bottom line results are likely to improve (PLN 5 million (USD 1.3 million) net profit expected at year-end 2004), driven by a positive investment income arising from the sell of real estate and other investments.

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