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A.M. Best Affirms Ratings of Polskie Towarzystwo Reasekuracji S.A.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of B+ (Very Good) and the issuer credit rating of "bbb-" of Polskie Towarzystwo Reasekuracji S.A. (Polish Re) (Poland). The outlook on both ratings remains stable.

The ratings reflect the good current and prospective risk-adjusted capitalisation and improved investment returns, which are offset by deteriorating technical results and continuing high reliance on premiums ceded by Polskie Towarzystwo Ubezpieczen S.A. (PTU).

A.M. Best believes that Polish Re's risk-adjusted capitalisation is expected to remain good over the next two years, with a projected improvement of the absolute capital base in 2005 due to the forecasted retention of net profits after dividend. In 2005, the company is likely to distribute a dividend of approximately 30%-40% of after-tax profits to its shareholders. A.M. Best expects the investment yield to be within a good 4%-4.5% range, benefiting from a shift in investment strategy from cash toward domestic treasury bonds and fixed interest securities.

A.M. Best believes that the technical results are likely to deteriorate in 2005 and 2006 as a result of the likely negative effects of the current softening market conditions on the loss and acquisition expense ratios. A.M. Best expects that the combined ratio will deteriorate over the next two years to approximately 104% compared to 99.2% in 2004. Therefore, in A.M. Best's opinion, Polish Re's net profits are likely to become heavily reliant upon investment returns to offset technical losses in 2005 and 2006. A.M. Best remains concerned about Polish Re's excessive reliance upon business ceded by PTU of approximately 45% that is not likely to decrease in 2005.

A.M. Best will closely monitor developments regarding recent changes to Polish Re's senior management team and any changes to its strategic objectives as these may exert pressure on its ratings. The changes in the management team were triggered by the Insurance and Pension Funds Supervisory Commission (KNUiFE).

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

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.
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Publication:Business Wire
Date:Sep 29, 2005
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