CEA Awarded "A-" Rating by A.M. Best Co.; First Time Rating ''Confirms CEA's Financial Strength and Claims-Paying Ability''.

Business Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--Dec. 9, 2002

The California Earthquake Authority has received an A- (Excellent) Financial Strength Rating from the A.M. Best Co., the oldest and most authoritative insurance company rating agency in America. According to A.M. Best, the A- rating means the CEA is an "excellent" insurance-related organization that has a strong ability to meet its obligations.

"This is great news for anyone looking to buy earthquake insurance in California," said Elaine Bush, the CEA's Chief Executive Officer. "A.M. Best Co. ratings are the universal gold standard by which insurers are judged -- to have A.M. Best give the Authority a first-ever 'A- (Excellent)' rating confirms the financial strength and claims-paying ability of the CEA."

In announcing the rating -- the first time the CEA's financial strength has been rated -- A.M. Best said it was based on "CEA's excellent risk-adjusted capitalization and the extensive financial flexibility and risk protection that derives from its unique organizational structure and extensive reinsurance program."

The rating represents an opinion based on a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance and business profile.

According to the rating agency, A.M. Best views the CEA's exhaustive catastrophe modeling and sophisticated risk and financial management practices as positive rating considerations. These factors are critically important to the rating assigned, particularly given the particular risks inherent in the CEA's business activities.

"I am extremely pleased and proud that after just six years of operation, the CEA has been judged worthy of one of Best's highest ratings, an indication of a strong financial position and solid management. And it means our policyholders can be confident the CEA will be there for them after a major earthquake," said Bush.

Best noted the CEA is required to insure all qualified properties regardless of where they are located, potentially exposing the Authority to adverse risk selection -- this factor partially offsets the CEA's financial strengths. In addition, Best noted that computer-modeled forecasts of earthquake losses provide some certainty but "no guarantee of their ultimate accuracy."

The California Legislature created the CEA in 1996 following the Northridge earthquake to provide broadly available, financially sound residential earthquake insurance. Today, with more than 750,000 policyholders and over $7 billion in financial resources to pay claims, the CEA is one of the world's largest earthquake-insurance providers, and the CEA's 18 participating insurers offer earthquake coverage for about two-thirds of California's insured homes.

The CEA is a privately financed, publicly managed organization funded by accrued policy premiums, investment income, reinsurance, financial commitments from participating insurance companies, and borrowed funds. No state or other public funds are used to operate the CEA or pay claims.