A.M. Best Affirms Ratings of Glacier Reinsurance and Its Subsidiary; Revises Outlook to Stable

Business Wire, May 3, 2007

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Glacier Reinsurance AG (Glacier Re) (Switzerland) and its subsidiary, Glacier Insurance AG (Glacier Insurance) (Liechtenstein). The rating outlook has been revised to stable from negative.

The ratings of Glacier Re reflect its excellent risk-adjusted capitalization, increasingly diversified portfolio and strong earnings. The revised outlook reflects A.M. Best's expectation that Glacier Re's enterprise risk management should prospectively reduce the volatility of earnings.

The ratings of Glacier Insurance are based on the strong support of the parent company in the form of a 95% quota share agreement.

Glacier Re's risk-adjusted capitalisation is further improving through the retention of earnings. During 2006, Glacier Re increased its shareholders' funds by USD 30 million in order to compensate for higher than expected losses in 2005. A.M. Best believes that a more diversified portfolio and better catastrophe modeling has reduced the potential for large losses from natural catastrophes. A.M. Best expects Glacier Re to continue the implementation of a comprehensive enterprise risk management system, which includes the development of an internal dynamic financial analysis (DFA) model.

In A.M. Best's view, Glacier Re's effort to shift its underwriting toward less catastrophe-prone lines and primary business (through Glacier Insurance) is resulting in a more diversified portfolio in 2007. A.M. Best expects stronger premium growth in 2007 than in 2006 (by 17% to USD 299 million), partially due to expansion of its direct insurance portfolio and a stronger focus on the small and medium enterprise segment and energy.

Glacier Re achieved strong earnings in 2006 with a post-tax profit of USD 55 million (return on premium 28.5%), partially due to absence of natural catastrophes but also strong underwriting performance in other lines of business (overall combined ratio 77.6%). A.M. Best believes that as a result of overall softening reinsurance rates and higher than expected natural catastrophe losses, Glacier Re's earnings are likely to be lower in 2007 but to remain strong. A.M. Best expects Glacier Re to continue its careful expansion in its portfolio by adhering to its strict pricing and underwriting policy.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.