S&P Affirms 'A' Rating on Lattice Insurance Co. Ltd.

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S&P Affirms 'A' Rating on Lattice Insurance Co. Ltd.
    LONDON, Sept. 24 /PRNewswire/ -- Standard & Poor's today affirmed its
single-'A' financial strength and counterparty credit rating on Lattice
Insurance Co. Ltd. (LICL). LICL is the wholly owned, Isle of Man-based,
captive insurer of the U.K. infrastructure technology group, Lattice Group PLC
(A/Stable/--).
    The rating is significantly influenced by LICL's parent's corporate credit
rating due to its function as an integral part of the Lattice Group's overall
risk-management strategy.
    LICL demonstrates very strong capitalization, strong profitability, and
conservative underwriting and investment strategies. Offsetting these
strengths is the company's relatively small size.
    Major rating factors:

    *     Very strong capitalization. LICL's capitalization stood at
          GBP125.2 million in 2000 but is expected to fall in 2001/2002
          following a distribution/restructuring of up to GBP30 million.
          Nevertheless, capital in relation to retained risk is expected to
          remain at about two times LICL's maximum exposure. The company
          manages its significant gross underwriting exposure via the support
          of a strong reinsurance program with companies rated
          single-'A'-minus or better.

    *     Strong profitability. LICL demonstrates strong profitability based
          on low expenses and high levels of investment income -- generated
          from a large surplus account -- but partially offset by a volatile
          claims record. This latter feature is inevitable in an account of
          this type.

    *     Conservative underwriting. LICL takes a cautious approach to
          underwriting potentially very significant and complex risks with low
          frequency but of potentially high magnitude. It does this through a
          combination of close risk assessment and comprehensive reinsurance
          protection.

    *     Conservative investment strategy. LICL's investment strategy is
          considered to be very prudent. Historically, all investments have
          been held in either bonds or cash. In 2001, the company has revised
          its investment guidelines, allowing 15% of the investment portfolio
          to be invested in equities. This introduction of investment risk
          into the portfolio is viewed as acceptable in light of strict
          investment guidelines.

    *     Size and group-dependent business position. LICL is small on a
          standalone basis and ultimately depends on its parent for financial
          flexibility, although at present there is little need for additional
          capital. The business position is good, but exclusively limited to
          insuring risks emanating from the Lattice Group.

    OUTLOOK: STABLE

    *     Standard & Poor's expects capitalization to remain very strong.

    *     LICL is expected to remain profitable at an underwriting level, for
          four years out of the next five. Bottom line profitability is
          expected to continue, contributing to the company's capital base.

    *     Going forward, equities will form about 15% of the investment
          portfolio. It is expected that this proportion will not exceed 20%.

    *     LICL is not expected to participate in business unrelated to the
          Lattice Group.
SOURCE Standard & Poor's
http://www.standardandpoors.com/ratings
CONTACT:
Philip Goldstone, +44-20-7847-7046, or David
Laxton, +44-20-7847-7079, both of Standard & Poor's