Trading Update

Trading Update
Brit Insurance Holdings PLC, the international insurance and reinsurance group, releases the following trading update.
February 10, 2009

Brit Insurance Holdings PLC, the international insurance and reinsurance group, releases the following trading update.

2008 results
Pre-tax profit is expected to be significantly higher than the current market consensus of £32m. The difference is principally due to the accounting treatment of net non-monetary liabilities arising in foreign currencies. Under International Financial Reporting Standards, such items are required to be held in the balance sheet at transaction rates of exchange. At 31 December 2008, the net difference in the valuation of non-monetary balance sheet items between transaction and closing rates was £54m.

Group Underwriting
Brit Reinsurance writes around 50% of its business at 1st January and achieved rate increases across the portfolio averaging just over 8% with a retention ratio of 85%. Rate increases at this key renewal date ranged from 4% in casualty treaty, 9% in property treaty (comprising 13% in North America and 4% in International), to 17% in marine. This trend is expected to accelerate through the course of 2009.

Brit Global Markets, whose business is more evenly spread throughout the year, achieved an average rate increase across the portfolio of 2%, reversing recent downward trends, with rises from 1.5% in financial and professional, 3% in property and 5% in marine, to 16% in the energy account.

Since Q3 2007, Global Markets has been reducing its exposure to financial institutions business because of concerns over the economic environment and this has continued in 2009 where rate increases of over 8% were not sufficient to change our view. Within Global Markets, total financial and professional gross written premium for the 2008 underwriting year was £320m. Of this, financial institutions business was £74m, of which £26m was US based, down from £87m and £37m respectively in the 2007 underwriting year.

For the 2009 underwriting year budgeted gross written premium for financial institutions is £61m, with only £8m from US based business. This defensive stance will be maintained until such time as we judge that the financial environment has improved.

Brit UK had a strong start to 2009, building on the good performance of 2008, where gross written premiums were up by over 25% on the previous year, driven by the planned growth in our regional offices, e-traded business and personal lines. This was against a backdrop of a stable headcount and expense base. We are encouraged by the continuous pricing improvement in motor classes, averaging over 6% throughout 2008.With all other classes showing significant slowing of rate reductions, we have a positive outlook for this business in 2009.

Group estimates for the total claims from Hurricanes Gustav and Ike have increased to US$112m net of reinsurance recoveries and reinstatement premium from the initial estimate of US$98m.

Fourth quarter return on our investment portfolio is estimated to be £21.3m resulting in a forecast positive full year return of 0.16% (unaudited). During the quarter, we continued to reduce our exposure to equities and specialist funds. At 31 December 2008 our portfolio was as shown below.

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