Fitch: Insurance Industry's Loss Reserves Position Shows Continued Improvement.

CHICAGO -- Fitch Ratings, in a report released today, discusses its observations of the property/casualty insurance industry's loss reserve position at year-end 2005 after completing an extensive analysis of reserves and underwriting experience for the industry and the insurers in Fitch's rating universe. 'Analyzing loss reserves and reserve adequacy are key components in evaluating property/casualty insurers' financial strength,' said James Auden, Senior Director, Fitch Ratings. 'Loss reserves constitute the largest liability on an insurer's balance sheet and represent an actuarial estimate based on statistical analysis and human judgment. As such, a degree of uncertainty surrounds loss reserve estimates.'

Fitch believes that the industry's loss reserve position has improved considerably in the last four years as reserves for recent hard market accident years were set at more prudent levels, while reserves established during the last soft market that developed deficiently are largely paid and represent an ever smaller percentage of total reserves.

Fitch also believes that reporting requirements and management's obligations under the Sarbanes-Oxley legislation passed in 2002 are having a positive overall effect on the industry's reserving practices.

Conclusions in the report include:

-- Fitch estimates that the domestic property/casualty insurance industry has a reserve deficiency of between $11.7 billion and $26.2 billion at year-end 2005, which is equal to between 2.6% and 5.9% of surplus reported at this date;

-- The industry's reserve position has vastly improved in recent years. At year-end 2002, Fitch projected an industry reserve deficiency of between $46 billion and $77 billion, which represented 16%-26% of reported surplus;

-- Fitch's Schedule P model estimates that reserves are essentially adequate in aggregate for accident years 1996-2005, representing significant improvement over prior years;

-- The industry's estimated reserve deficiency now is primarily related to latent exposures, including asbestos-related claims from business written prior to the early 1970s, as well as environmental and other latent exposures.

For a copy of the special report released today, 'Property/Casualty Insurance Reserve Adequacy: Hard Market Improvements and the SOX Effect,' please visit the Fitch Ratings web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.