A.M. Best Downgrades Rating of Erika Insurance Ltd. - publ -

OLDWICK, N.J.--()--Sept. 10, 2004--A.M. Best Co. has downgraded the financial strength rating to B++ (Very Good) from A- (Excellent) of Erika Insurance Ltd. (publ) (Erika) (Sweden). The outlook is stable.

The downgrade reflects A.M. Best's reassessment of Erika's role within the EF Group (EF), a provider of language courses worldwide, and the increased risk associated with the high dependence upon reinsurance from an affiliated company, Efekta Insurance Ltd (Efekta). The rating also factors Erika's prospective improvement in earnings following the divestment of third party business.

Erika insures only those risks of EF clients, making it dependent upon the highly volatile travel industry, negatively impacting Erika's business flow and risk profile.

Since the divestment of third party business in 2003, there has been a significant increase in the credit and liquidity risk associated with Erika as it cedes 85% of the gross premiums written to Efekta, (EF's reinsurance captive based in Bermuda). Credit and liquidity risk is further exacerbated by a non-callable loan arrangement between Efekta and an EF group subsidiary.

Prospectively, A.M. Best expects Erika's operating performance to improve from a lower loss ratio due to the company's better control of claims for group related business and reduced net premium. Historically, the EF business has had a very good record with an average loss ratio of 45% over the last four years.

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 http://www.ambest.com.

Contacts

A.M. Best Co.
Public Relations
Jim Peavy, +(1) 908 439 2200, ext. 5644
james.peavy@ambest.com
Rachelle Striegel, +(1) 908 439 2200, ext. 5378
rachelle.striegel@ambest.com
or
Analysts
Diniyah Rehman, +(44) 20 7626 6264
diniyah.rehman@ambest.com
Simon Martin, +(44) 20 7626 6264
simon.martin@ambest.com

Contacts

A.M. Best Co.
Public Relations
Jim Peavy, +(1) 908 439 2200, ext. 5644
james.peavy@ambest.com
Rachelle Striegel, +(1) 908 439 2200, ext. 5378
rachelle.striegel@ambest.com
or
Analysts
Diniyah Rehman, +(44) 20 7626 6264
diniyah.rehman@ambest.com
Simon Martin, +(44) 20 7626 6264
simon.martin@ambest.com