Lloyd's Syndicate 0260 -- Moody's Analytics assigns a negative outlook to the B- (Below Average) Continuity Opinion of Lloyd's Syndicate 0260

London (1) London New York Robert S. Smith Allerton G. Smith Director Senior Director Moody's Analytics UK - Insurance Capital Markets Research Group Moody's Analytics Moody's Analytics JOURNALISTS: 44 20 7772 5456 JOURNALISTS: 212-553-0376 SUBSCRIBERS: 44 20 7772 5454 SUBSCRIBERS: 212-553-1653 Moody’s Analytics assigns a negative outlook to the B- (Below Average) Continuity Opinion of Lloyd’s Syndicate 0260. LONDON, 25th November 2013 – Moody's Analytics (Moody’s) today assigned a negative outlook to the B- (Below Average), previously under review for possible downgrade, Continuity Opinion of Lloyd's syndicate 0260 (Canopius Managing Agents Limited) in light of continuing losses being forecast / budgeted by the syndicate in what remains a very competitive Motor market. The syndicate, 92% backed by Canopius Group Ltd and with a 2013 capacity of £70m, writes a specialist Motor account. In a recently released auction announcement, Canopius stated that Lloyd’s had confirmed its approval for the syndicate to trade for the 2014 year of account but that Lloyd’s was currently not minded to agree to the syndicate trading for 2015, absent a demonstrable, material and sustainable improvement in performance. Canopius also stated that should syndicate 260 not trade beyond 2014, it was their intention to seek Lloyd’s consent to transfer the business into syndicates 958 and 4444, as they regarded the business as an important part of their UK retail strategy/ product offering and believed that it could operate more successfully within a larger syndicate. Canopius acquired the operation in June 2010 and have been re- underwriting the account, although the open year, 3-year account forecasts for the 2011 and 2012 accounts are currently forecast to be loss-making, with mid-point losses of respectively 8% and 5% of capacity currently forecast. The current 2014 proposed SBF is also for a loss of 5% of capacity. In terms of reported annual results since the Canopius acquisition, the syndicate recorded a loss of 7% NPE on an annually accounted basis for 2012 on a combined ratio of 112% (including forex) at 31.12.12, having recorded a loss of 23% NPE for 2011 on a combined ratio of 123%, with 2-year average results currently being in line with C+ / B- continuity opinion benchmark returns in terms of indicative average annual returns on capital. Canopius had sought to acquire the remaining capacity on the syndicate earlier this year and had intended to merge syndicate 260’s business into Canopius managed syndicates 958 and 4444, which write business in parallel, subject to Lloyd’s approval. However, with the offer not being accepted by some of the remaining third party members, the syndicate is to trade forward as a stand-alone syndicate for 2014. With Canopius supporting 92% of the business and having affirmed its commitment to syndicate 260’s business, Moody’s commented that in terms of continuity of business relationships, it currently considered the likelihood of the business being placed into run-off at the end of 2014 as limited, with it more likely that the syndicate would be merged into syndicates 958 and 4444. Moody’s continued, however, that with the syndicate’s losses continuing and the Motor market remaining very competitive amid a changing legal landscape, the business faced some material headwinds. With regard to potential future returns for investors participating on syndicate 260, Moody’s stated that, should the syndicate be merged into syndicates 958 and 4444, it expected that a risk premium in terms of syndicate 260’s RITC was likely to apply, with the potential for returns for investors to be more in line with benchmarks for the C+ (Below Average) peer group, albeit that any such risk premium was likely to be significantly less than might apply were the syndicate’s business be placed into run-off. However, overall in terms of continuity of business relationships, with Canopius having affirmed its commitment to syndicate 260’s business, improvement in the syndicate’s returns since the Canopius acquisition and with more recent results more in line with B- (Below Average) benchmarks, but with the syndicate continuing to be unprofitable and facing a very competitive market, Moody’s has therefore affirmed syndicate 260’s B- (Below Average) Continuity Opinion and assigned a negative outlook to the Opinion, reflecting Moody’s view of relative continuity prospects for the syndicate over the insurance cycle. The last action was in October 2013 when the syndicate’s B- (Below Average), stable outlook, Continuity Opinion was placed under review for possible downgrade. Canopius Syndicate 260 is a Motor syndicate, backed 92% by Canopius Group Ltd, which operates within the Lloyds of London insurance market. * * * © Copyright 2013 Moody’s Analytics, Inc. and/or its licensors and affiliates (collectively, “MOODY’S”). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. 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