A.M. Best Completes Rating Review for Combined Specialty Group; Assigns Indicative Senior Debt Rating.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--June 20, 2002

A.M. Best Co. has completed its rating review of Combined Specialty Group, Inc. (CSG), the new holding company created to be the parent of Aon Corporation's (NYSE: AOC) insurance underwriting subsidiaries, which is expected to be spun off in the third quarter of 2002 pending regulatory and board approvals.

A.M. Best has taken a number of rating actions as outlined below. The financial strength ratings of the property/casualty and life/health insurance companies were placed under review with developing implications on April 20, 2001, when Aon announced its plan to spin off the insurance underwriting operations from its flagship brokerage and consulting businesses.

An A (Excellent) financial strength rating has been assigned to Combined Specialty Insurance Company (CSIC), which formerly conducted business as Virginia Surety Company, Inc., the largest independent underwriter of consumer extended warranties worldwide. Going forward, CSIC is expected to serve as CSG's principal property/casualty operating company, continuing to write extended warranty and credit insurance as well as introducing new products in specialty segments of the commercial property/casualty market.

The A (Excellent) financial strength rating of Combined Insurance Company of America (CICA), CSG's lead life/health entity, and its marketing arm, Combined Life Insurance Company of New York, has been affirmed. An A- (Excellent) financial strength rating has been assigned to Sterling Life Insurance Company, a strategic subsidiary that specializes in providing healthcare plans to Medicare beneficiaries. Also, financial strength ratings of A (Excellent) and A- (Excellent) have been affirmed for FFG Insurance Company and Resource Life Insurance Company, respectively.

Effective June 19, 2002, CSG acquired Sheffield Insurance Corporation, a non-admitted insurer, from Vesta Insurance Group. As a result, A.M. Best has upgraded the financial strength rating of Sheffield to A (Excellent) from B+ (Very Good). CSG is in the process of changing the name of the company to Combined Excess & Surplus Lines Insurance Company (CESLIC). CESLIC will be 100% reinsured by CSIC; all business in this company will be written on an excess and surplus basis.

Additionally, A.M. Best has assigned an indicative senior debt rating of "a-" to securities to be issued by CSG that will effectively replace approximately $600 million in debt allocated from Aon in connection with the spin-off transaction. The outlook on all of CSG's ratings is stable.

Currently, the capital positions of CSG's operating subsidiaries are adequate for their respective ratings. However, based on management's growth plans for the new specialty property/casualty business--which A.M. Best feels are aggressive--and the associated potential earnings volatility, a significant capital contribution would be anticipated in the near term to maintain the ratings. Prior to the spin-off, A.M. Best expects Aon to obtain additional equity financing in the $400-$600 million range and to contribute the proceeds to the underwriting subsidiaries. Projected total debt to capital for CSG at year-end 2002 will be roughly 25%; management plans to maintain financial leverage in the 20%-25% range. Projected fixed charge coverage for 2002 is over five times; cash coverage is projected to be slightly under two times. In the medium term, A.M. Best expects fixed charge coverage to be in the six to eight times range with cash coverage expected to increase to three times by 2004.

The ratings reflect the leadership positions and strong operating performance of both the warranty and accident and health businesses, steady cash flows, disciplined underwriting, seasoned management team and opportunities to leverage strategic business partnerships facilitated by the spin-off from Aon. In addition, A.M. Best recognizes the currently favorable pricing environment in the commercial property/casualty sector as well as the enhanced earnings diversity from which CSG will benefit. The group maintains significant operations in Canada (second leading writer of individual health coverages) as well as various countries in Europe, Asia Pacific and South America--all of which are generally profitable. Finally, CSG's balance sheet strength was improved through the securitization of $450 million of limited partnership investments and associated commitments at year-end 2001, $170 million of which was monetized into cash. Although this somewhat reduced the group's exposure to this class of investments, CSG's portfolio still comprises a significant portion of higher-risk assets such as preferred stock, common equities and limited partnerships relative to several peers.

For a list of A.M. Best's rating actions on Combined Specialty Group, please visit http://www.ambest.com/press/combinedspecialty.pdf.

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.