National Indemnity Affirmed

Fitch Ratings affirmed the “AAA” insurer financial strength ratings of the National Indemnity Co. and the six associated members of the National Indemnity Group (National Indemnity). The rating outlook is stable.

The ratings reflect National Indemnity’s enormous capital base, excellent reinsurance market position, solid liquidity profile, low operating leverage and underwriting discipline. Offsetting these positives is National Indemnity’s high investment risk associated with their large equity allocation and the volatile nature of the group’s high-level catastrophe excess-of-loss reinsurance product line.

National Indemnity reported a pre-tax (GAAP) underwriting gain of $534 million at year-end 2002 versus underwriting losses of $647 million in 2001. The vast majority of the gain in 2002 stemmed from National Indemnity’s Catastrophe & Individual Risk Unit, which saw significant opportunities after the events of Sept. 11, 2001.

National Indemnity’s non-catastrophe reinsurance business also continues to be an attractive product line due to the anticipated extended claim payment period that allows for large future investment income. Its high operating earnings in this line of business is a product of historically small underwriting losses offset by the large amounts of investment income on National Indemnity’s substantial invested asset base.