A.M. Best Downgrades Ratings of The Exchange Insurance Company Limited; Ratings Remain Under Review.

OLDWICK, N.J. -- A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B++ (Good) and the issuer credit rating to "bb" from "bbb+" of The Exchange Insurance Company Limited (Exchange) (United Kingdom). The ratings remain under review, but the implications of the review have been revised to developing from negative.

The ratings of Exchange have been downgraded following the failure to complete the sale of a 50% stake in the company to an external investor. (See related press release dated 10 November 2008). The revised ratings reflect weakening in Exchange's risk-adjusted capitalisation due to the recent decline in the UK property market. This has led to increased claims volume from the exchange bonds issued by the company, delays in receiving recoveries from property purchasers who do not complete transactions and higher than expected write-offs of these recoveries.

Exchange has entered into negotiations with other external investors to raise capital, and the ratings remain under review pending resolution of these discussions. If the company succeeds in raising additional capital, an upgrade is possible. However, should the current negotiations fail, a further downgrade is likely. A.M. Best expects to complete its review of the rating by the end of February.

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.