A.M. Best affirms ratings of Omega

PRESS RELEASE

14th September 2010

Omega Insurance Holdings Limited

A.M. Best affirms ratings of Omega Insurance Holdings Limited, its subsidiaries and Syndicate 958

·; Syndicate 958 rated A (excellent)

·; Omega Specialty Insurance Co Ltd rated A- (excellent)

·; Omega US Insurance Inc. rated A- (excellent)

·; All ratings assigned a stable outlook

Omega Insurance Holdings Limited ("Omega" or "The Group") is pleased to announce that A.M. Best has removed from under review with negative implications and affirmed the ICR of "bbb" of Omega Insurance Holdings Limited (Omega) (Bermuda) and the FSR of A-(Excellent) and ICR of "a-" of Omega Specialty Insurance Company Limited (OSIL) (Bermuda). A.M. Best has also removed from under review with negative implications and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Omega US Insurance, Inc. (Omega US). All ratings have been assigned a stable outlook. Omega is the parent company of OSIL, Omega US Insurance, Inc. (Omega US) (United States), Omega Underwriting Agents Limited (OUAL) and Omega Dedicated Limited (ODL). Additionally, A.M. Best has affirmed the Best's Syndicate Rating of A (Excellent) and issuer credit rating of "a+" of Lloyd's Syndicate 958, which is managed by OUAL. These ratings retain a stable outlook.

Commenting on A.M. Best's rating affirmation, Richard Pexton, CEO of Omega, commented:

"We are extremely pleased to receive this rating affirmation from A.M. Best, which underlines the strengths of the Omega Group and confirms the removal of any previous uncertainty relating to our management composition and future strategy. We welcome A.M. Best's comments, in particular the acknowledgment of our good risk-adjusted capitalisation, strong operating performance and excellent business profile across the Group."

In rating The Group and OSIL, A.M. Best made the following comments:

"The ratings of Omega and OSIL had been placed under review reflecting the uncertainty regarding Omega's board composition, operational management and future strategy. Following the appointment of a new board and chief executive officer and a wide-ranging review of Omega's operations by the new chairman and chief executive officer, A.M. Best's concerns have been alleviated.

The ratings of OSIL reflect the expectation that its risk-adjusted capitalisation will remain excellent in 2010, as the company continues to benefit from the funds transferred from Omega following a successful capital-raising exercise at the end of 2008. OSIL's risk-adjusted capitalisation is further enhanced by a comprehensive reinsurance programme that limits its exposure to major losses.

A strong operating performance by OSIL in 2009 produced profits of USD 44.5 million. However, following major market losses in the first half of the year, including the Chilean earthquake, Deepwater Horizon oil rig disaster, Aban Pearl gas rig and Australian hailstorms and a strengthening of claims reserves, a weaker underwriting performance is anticipated in 2010, with a combined ratio of almost 100%. Investment income is likely to be higher than in 2009, with the continued strong performance in bond markets. OSIL is expected to continue to conform to the group's conservative reserving and reinsurance strategy.

OSIL continues to benefit from the strong market profile of Omega and Lloyd's Syndicate 958 (United Kingdom). Approximately 70% of the company's business in 2010 is expected to be associated with syndicate 958's underwriting through a 20% whole account quota share reinsurance arrangement with the syndicate and the reinsurance of ODL (Omega's corporate member at Lloyd's, which has increased its ownership of the syndicate's capacity to 38.8% in 2010 from 16.4%). Business written directly by OSIL is expected to remain stable, and a modest increase is anticipated in business derived from Omega US, for which OSIL underwrites a 50% whole account quota share."

In rating Omega US, A.M. Best made the following comments:

"The ratings of Omega US reflect its strong capitalization driven by its low underwriting leverage, efforts to maintain underwriting discipline and the explicit support provided by Omega in the form of capital infusions, subsequent to the initial capitalization of Omega US in 2007, and quota share reinsurance provided by OSIL. The ratings therefore reflect the implied continued support to be provided to Omega US by Omega in the future to support Omega US' expansion in the United States. Omega US has faced notable challenges inherent in the operation of any company during its early stages, including the overall execution risk of its business plan in the highly competitive U.S. surplus lines sector."

In rating Lloyd's Syndicate 958, A.M. Best made the following comments:

"The ratings of Lloyd's Syndicate 958 reflect the financial strength of the Lloyd's market, which underpins the security of all Lloyd's syndicates. In addition, syndicate 958 benefits from financial flexibility provided by Omega, which is expected to maintain strong consolidated risk-adjusted capitalisation in 2010. Omega Dedicated Limited, Omega's corporate member at Lloyd's, provides 38.8% of the capacity of syndicate 958 for its 2010 year of account and Omega Specialty Insurance Limited (Bermuda), a subsidiary of Omega, underwrites a 20% quota share of the syndicate.

A strong performance by syndicate 958 on an annually accounted basis in 2009 produced profits of GBP 30.7 million with a combined ratio of 86%. However, the syndicate's combined ratio in 2010 is likely to deteriorate to between 90% and 95% following major market losses in the first half of the year, including the Chilean earthquake, Deepwater Horizon oil rig disaster, Aban Pearl gas rig and Australian hailstorms. On a traditional year of account basis, the 2007 year of account closed with a return on capacity of 16.4%. For 2008, the return is expected to be between 0% and 5%, as a result of losses from hurricanes Gustav and Ike and lower investment returns, while for 2009 the return is expected to be between 5% and 15%, reflecting the generally benign catastrophe experience during the year, offset by the impact on the 2009 account of the Chilean earthquake and Deepwater Horizon oil rig explosion in early 2010.

Syndicate 958 has a good business profile within the London market as a specialist underwriter of short-tail, small to medium-sized property risks, predominantly located in the United States (more than half of gross written premium in 2009 was derived from U.S. business). In addition, the syndicate benefits from its presence in the European market through Omega Europe GmbH, a wholly owned subsidiary of Omega that operates solely as a coverholder to the syndicate."

ENDS

Enquiries:

David Haggie / Juliet Tilley

Haggie Financial

Tel: +44 (0)20 7417 8989