A.M. Best Downgrades Ratings of Primary Insurance Company Limited.

Revises Under Review Status to Developing Implications

OLDWICK, N.J. -- A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B++ (Very Good) and the issuer credit rating (ICR) to "bb+" from "bbb"of Primary Insurance Company Limited (PICL) (Ireland). The under review status of the ratings applied in June 2006 has been revised to developing from negative.

The downgrade reflects weakening in PICL's risk adjusted capitalisation due to deterioration in its financial performance caused partly by reserve strengthening in its commercial small to medium-sized (SME) account in 2006. Performance has also been affected by higher than anticipated reinsurance costs, further softening in PICL's main lines of business and high expenses caused by a reduction in the level of business written. Whilst the reduction in business written will benefit PICL's risk adjusted capitalisation, the company is dependent on financial support from its ultimate parent, Primary Group Limited (PGL) (Bermuda).

The ratings remain under review while A.M. Best assesses the impact of management actions PGL proposes to take to strengthen risk-adjusted capitalisation. If PGL provides additional explicit support, then PICL may be able to recover a secure rating. However, in the absence of any action from PGL, a further downgrade is likely.

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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.