A.M. Best Affirms Great States Insurance Following Acquisition Announcement

Business Wire, July 8, 1998

OLDWICK, N.J.--(BUSINESS WIRE)--July 8, 1998--A.M. Best Co. today affirmed its "B " (Very Good) rating on Great States Insurance Co., following the recent announcement that HIH Winterthur International Holdings has agreed to acquire all of Great States' outstanding stock from PacifiCareHealth Systems Inc.

This affirmation reflects A.M. Best's expectation that the company's financial position will not be materially affected by the transaction. The transaction is expected to close in the fourth quarter.

Great States' rating reflects the company's good capitalization, favorable liquidity and conservative investment portfolio.

Great States' underwriting performance has deteriorated significantly over the past few years, reflecting the impact of competition and rate reductions in California. To improve its results, the company has withdrawn from the unprofitable California workers' compensation market, effective January 1998. Most of the company's 1998 business will be written in Arizona.

In the longterm, A.M. Best expects the company to benefit from its new affiliations, as its parent has experience in managing workers' compensation entities and is committed to supporting Great States' insurance operations. The company also should benefit from the expense savings due to the administrative integration with its new affiliate, HIH America Compensation & Liability Co., which is rated "A-" (Excellent) and also specializes in the workers' compensation market. HIH America will manage Great States' operation. HIH America's ratings are unaffected by the announcement.

HIH Winterthur is a publicly traded company the Australian Stock Exchange. HIH Winterthur is 51% owned by Winterthur Holdings Australia Limited, which is ultimately 100% owned by the Credit Suisse Group.

A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.

    CONTACT: Jeffrey Dunsavage
              908/439-2200, ext. 5618
              dunsavj@ambest.com