A.M. Best Affirms Ratings of Four Beazley-Managed Lloyd’s Syndicates; Downgrades Beazley’s Issuer Credit Rating

  A.M. Best Affirms Ratings of Four Beazley-Managed Lloyd’s Syndicates;
  Downgrades Beazley’s Issuer Credit Rating

Business Wire

LONDON -- February 8, 2013

A.M. Best Europe – Rating Services Limited has affirmed the financial strength
ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of
Lloyd’s Syndicate 2623, Lloyd’s Syndicate 623, Lloyd’s Syndicate 3623 and
Lloyd’s Syndicate 3622 (United Kingdom). At the same time, A.M. Best has
downgraded the ICR to “bbb” from “bbb+” of Beazley plc (Beazley) (Jersey), the
ultimate holding company of the Beazley group of companies, and of Beazley
Group Limited (United Kingdom), an intermediate holding company. Concurrently,
A.M. Best has downgraded the debt ratings to “bbb-” from “bbb” on the GBP 150
million junior subordinated notes due 2026 and the USD 18 million junior
subordinated notes due 2034 issued by Beazley Group Limited. The outlook for
all ratings is stable. Subsequently, A.M. Best has withdrawn the ratings of
Beazley, Beazley Group Limited and the associated debt ratings, as the
companies have requested to no longer participate in A.M. Best’s interactive
rating process.

The downgrade of the ratings of Beazley, Beazley Group Limited and the rated
debt follows the announcement on 7 February 2013 of the group’s offer to buy
back the majority of its subordinated debt in 2013 and possible issue of
senior debt. The buy-back of GBP 47.3 million of subordinated debt in 2012 and
the expected replacement in 2013 of subordinated debt with senior debt reduces
the quality of the group’s capital according to A.M. Best’s rating criteria.
In addition, consolidated risk-adjusted capitalisation has been negatively
affected since 2011 by the group’s active dividend strategy and the full
utilisation of its catastrophe risk appetite.

Beazley has a good performance record, supported by strong reserving
practices, and is expected to continue to benefit from internal capital
generation. In addition, financial flexibility is strong, due in part to
relatively low debt leverage and good interest expense coverage. However, the
group is expected to continue to follow an active capital management strategy
and, taking into account the quality of capital, A.M. Best now expects the
group’s consolidated risk-adjusted capitalisation to be maintained at a level
that supports a “bbb” holding company rating rather than a “bbb+” rating.

Beazley underwrites primarily within the Lloyd’s market, with only 2% of net
written premium in 2011 written outside the Lloyd’s market. Syndicates 2623,
623, 3623 and 3622 are managed by Beazley Furlonge Limited. Syndicates 2623
and 623 underwrite business at Lloyd’s in parallel, with premiums for the 2013
year of account split 82% for syndicate 2623 and 18% for syndicate 623, in
line with each syndicate’s share of overall combined capacity. Syndicates
2623, 3623 and 3622’s capital is provided 100% by Beazley, via its corporate
member, while syndicate 623 is supported by third party capital. The
syndicates benefit from the good financial flexibility of the Beazley group as
well as from the financial strength of the Lloyd’s market, which underpins the
security of all Lloyd’s syndicates.

Beazley has a track record of good and stable underwriting performance, as
demonstrated by an average combined ratio of 91% for the period 2009-2012. Its
well-balanced underwriting portfolio, which includes a large casualty account,
has contributed to its stable results record. The combined ratio for 2012 was
88%, and a similar ratio is expected for 2013, in line with the long-term
performance of the group. Investment income has been positive but modest since
2008, reflecting the low interest rate environment.

The group has a strong business profile in the Lloyd's market through
syndicates 2623 and 623 in particular, reflected in good leadership positions
in key lines. A well-diversified portfolio of professional indemnity,
property, reinsurance, marine and political risk and contingency business is
underwritten. In addition, life, accident and health business is written
through syndicates 3623 and 3622.

A factor that may lead to positive or negative rating actions for the
syndicates is a change in the rating of the Lloyd’s market, which currently
carries an FSR of A (Excellent) and an ICR of “a+”, and has a stable outlook.

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Key criteria utilised include: “Rating Lloyd’s Syndicates”;
“Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal
BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of
Insurance Groups”; “Equity Credit for Hybrid Securities”; “Insurance Holding
Company and Debt Ratings”; and “Risk Management and the Rating Process for
Insurance Companies”. Best’s Credit Rating Methodology can be found at
http://www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to
required disclosures: A.M. Best Europe - Rating Services Limited Supplementary
Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best
Company. Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more information,
visit www.ambest.com.

       Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best Europe – Rating Services Limited
Mathilde Jakobsen
Senior Financial Analyst
+(44) 20 7397 0266
mathilde.jakobsen@ambest.com
or
Catherine Thomas
Director, Analytics
+(44) 20 7397 0281
catherine.thomas@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com