A.M. Best Rates HypoVereinsbank's Enhanced LOC Program.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 26, 2002

A.M. Best Co. has assigned an "aaa" senior secured rating to a credit enhanced letter of credit program issued by Bayerische Hypo- und Vereinsbank, AG (HVB) (DAX: HVMG).

The first approved participant in the program is Grand Central Re Limited, Bermuda. The letters of credit issued under this program will support obligations under reinsurance agreements entered into by reinsurance applicants approved by A.M. Best (applicants/participants) and are collateralized by a portfolio of investments.

This rating action follows the January 18, 2002, assignment by A.M. Best of an initial financial strength rating of A (Excellent) to Grand Central Re, a strategic joint venture formed by HVB and Max Re Capital Ltd. (NASDAQ: MXRE), to support their respective worldwide risk management operations. This rating is based upon A.M. Best's credit analysis that integrates an enterprise ratings approach with the modeling and stress testing of specific assets taking into account the implied rating of the pledged collateral relative to HVB's financial strength.

This facility exists for some applicants' clients who require that they be provided highly rated letters of credit to provide security and to meet certain regulatory requirements. HVB's New York Branch (licensed by the New York State Banking Department and subject to the banking laws of the State of New York, U.S.A.) will issue letters of credit in favor of certain ceding insurance companies as requested by approved participants in the program. HVB will enter into a collateral trust agreement under which HVB pledges as collateral a changing mix of investments including alternative asset classes and investment-grade fixed income securities.

A.M. Best's rating reflects:

-- the modeled determination of the level of collateral haircuts based upon
stressed analysis of historical data coupled with the credit, consistent with a
"aaa" rating criteria

-- the structural integrity of the collateral facility, including the
perfection of security interest in all financial assets comprising the
collateral pool

-- the diversification inherent in the portfolio of investments

-- the limitations placed on the proportions of investment-grade fixed income
and alternative assets and

-- the program's ability to adjust the collateral amount given new market
conditions.

Over time, HVB may be permitted to withdraw excess assets from the collateral trust or be required to pledge additional assets, consistent with supporting the credit quality of the letters of credit as market conditions change. In Grand Central Re's case, HVB manages the invested assets. It may not be the investment manager for other applicants. The management of pledged assets follows detailed guidelines on diversification, credit quality (in the case of fixed income securities) and allocation between fixed income and alternative assets.

Reflecting the innovative nature of the program and the expectation that the pledged securities and amounts committed under the letters of credit will change frequently, A.M. Best will closely monitor each facility's credit quality under the program as supported by the collateral pool. This will involve a regular assessment and stress testing of data from HVB and participants on the price volatility of the pledged assets and the adequacy of the assets pledged to the facility. This rebalancing process is designed to ensure that the credit enhancement remains consistent at the current rating level for participants' clients.

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.