A.M. Best Upgrades Rating of Sirius International Insurance Corp.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Aug. 21, 2000

A.M. Best Co. has upgraded the financial strength rating of Sirius International Insurance Corp., Stockholm, Sweden, from A (Excellent) to A+ (Superior). The rating upgrade also applies to Scandinavian Reinsurance Company and Sirius America Insurance Company.

The group rating applies to the parent company in Sweden, Sirius International Insurance Corp., along with its branch operations, including the newly acquired Sirius Belgium Reassurance, its wholly owned subsidiary in Bermuda, Scandinavian Reinsurance Company and the affiliated company Sirius America Insurance Company in the United States. Both Scandinavian Reinsurance Company and Sirius America Insurance Company are considered core and integral operations within the group.

The rating action reflects Sirius International's consistently favorable operating trends, sustained profitable growth, excellent capitalization and balance sheet strength and management's demonstrated success in enhancing the group's competitive market position. The group has achieved yearly growth in its capital and solvency position over the last five years, driven by its solid financial performance. The economic value of the group is measured by targeted returns on allocated capital. This focus on profit is evident at both the group and individual company level, with record profits and total returns, after tax, on equity of 11% for 1999 and as an average over the past five years. In addition, the rating acknowledges Sirius International's strict operating guidelines, conservative reserving philosophy, prudent underwriting and high quality investment portfolio which have enabled the group to outperform most of its reinsurance peers.

Sirius International Insurance Corporation has a leading market position in Scandinavia and benefits from competitive advantages in niche areas such as alternative risk insurance products, bonds and guarantees and political risks, while it continues to expand its principal line of excess of loss property covers. Record profits were achieved in 1999 with a combined ratio of 100%, which is the five year average. Sirius Belgium complements the parent's portfolio by writing credit/bond and life reinsurance in Continental European countries. Scandinavian Reinsurance Company is a recognized leader in providing innovative specialty finite insurance and reinsurance solutions in the United States, Europe and Japan. The company specializes in reinsurance programs such as surplus relief, loss portfolio transfers, prospective/aggregate covers and funded excess of loss covers. Scandinavian Reinsurance Company enjoyed its eleventh consecutive year of record underwriting profits and net income with an average combined ratio for the past five years of under 91%. Sirius America Insurance Company is a direct insurance writer licensed in 46 U.S. states and benefits from a stop loss cover from Sirius International Insurance Corporation.

Sirius International Insurance Corporation, Scandinavian Reinsurance Company and Sirius America Insurance Company are integral parts of the insurance business area of the ABB Financial Services business segment of the ABB Group, generating 38% of the business segment's 1999 earnings. The role of ABB Financial Services within the ABB Group has become strategic as the group continues to take advantage of synergies between insurance and financial services. The three insurance units receive parental backing from the financially strong ABB Group, which supports the companies as integral entities for its international presence in insurance and reinsurance.

Partially offsetting these strengths was erosion of the technical result and profit margin from the frequency of loss events in 1999. Though the group was not as negatively affected as other reinsurers, underwriting results, excluding allocated investment income from non-technical operations, were negative for the first time in four years. Lothar and Martin storm losses at the end of 1999 impacted the portfolio of the new Belgian operations, which were included in the group's accounts starting in December 1999. In addition, the purchase of Sirius Belgium Reassurance increased the group's financial leverage and management faces the challenge of integrating reporting and information systems into the group. A.M. Best expects underwriting results to be restored to profitability in 2000 as the group shifts business in its portfolio away from quota share treaties to excess of loss contracts while also moving toward a client solutions focus rather than a product approach. The group will also expand its alternative risk transfer (ART) offerings while providing larger risk capacities. The rating outlook is stable.

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.