A.M. Best Downgrades Ratings of Lloyd's Syndicate 1414.

OLDWICK, N.J. -- A.M. Best Co. has downgraded the Best's Syndicate Rating to A (Excellent) from A+ (Superior) and the issuer credit rating (ICR) to "a+" from "aa-" of Lloyd's Syndicate 1414 (United Kingdom), which is managed by Ascot Underwriting Limited (AUL). The outlook for both ratings is stable.

The rating actions follow receipt of notice of cancellation from American Home Assurance Company (a member of the American International Group (AIG)) of its unconditional guarantee of the syndicate's liabilities. AIG's management decided to terminate the guarantee in an effort to optimize capital efficiency and simplify AIG's structure. Although the explicit support provided by the guarantee was an important factor in the rating, A.M. Best believes AIG remains committed to syndicate 1414 as reflected in the continuation of its shareholding (currently approximately 98%) in Ascot Corporate Name Ltd, the syndicate's sole capital provider. The revised rating also factors syndicate 1414's good anticipated operating performance, its well diversified underwriting portfolio, as well as the financial strength of the Lloyd's market, which underpins the security of all Lloyd's syndicates.

In A.M. Best's opinion, syndicate 1414 is likely to generate good earnings for the 2007 year of account and further ahead, although performance will continue to be dependent on catastrophe experience. In 2006, rating conditions strengthened across the syndicate's core excess of loss, property and energy accounts, and a return on capacity after personal expenses in excess of 25% is likely for this year of account. A partially offsetting rating factor is weaker than anticipated performance in 2005, with the syndicate expected to produce a loss on capacity after personal expenses of approximately 18%, driven by its significant exposure to the U.S. hurricanes (net incurred loss of approximately GBP 160 million (USD 319 million)). On an annually accounted basis, the syndicate reported a profit of GBP 158.3 million (USD 310 million) for 2006 (compared to a GBP 91.7 million (USD 157.6 million) loss in 2005).

A.M. Best believes that the syndicate's portfolio is well diversified by account type with an emphasis on short tail, catastrophe-exposed business. The accounts written include excess of loss, property, energy, cargo, terrorism, specie, fine art, marine hull, marine liabilities, aviation war and political risks.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.