Lloyd's Syndicate 1218 -- Moody's Analytics assigns a B^ (Average) continuity opinion to Lloyd's syndicate 1218

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 B^ (Average) continuity opinion to Lloyd’s syndicate 1218 LONDON, May 13th 2014 – Moody's Analytics (Moody’s) today assigned a B (Average) continuity opinion to Lloyd's syndicate 1218 (Newline Underwriting Management Limited), reflecting the syndicate's average profitability in recent years and the expectation that future returns and continuity prospects have the potential to be consistent with a B^ (Average) continuity opinion. Newline Lloyd’s syndicate 1218 predominantly writes a UK and International Liability book of business, with annual gross premium written £106m in 2013. The syndicate is 100% backed by dedicated vehicle Newline Corporate Name for 2014, a subsidiary of Odyssey Reinsurance Company (Moody’s Investors Service A3 financial strength rating) and ultimately owned by Fairfax Financial Holdings (Moody’s Investors Service Baa3 senior unsecured debt rating). A new underwriter, Stephen Gordon, who was previously syndicate 1218’s underwriter between 2002 to 2008, was recently appointed in March 2014. Moody's stated that syndicate 1218 had recorded an annually accounted profit of 12% of Net Premium Earned (NPE) for 2013 with a combined ratio of 105% (including forex) at 31.12.13, the profit being net of a loss of 10% of NPE on investments relating to Funds at Lloyd’s deposited at the syndicate (FIS). On a cross-cycle basis, Moody’s commented that the syndicate had recorded average profits of 26% of Net Premium Earned (NPE) for the period 2005 to 2013, with average investment returns contributing 28% of NPE (4% of NPE relating to FIS), performing in line with the B+ (Above Average) peer group in terms of indicative average annual returns on capital, excluding returns on FIS. Moody’s commented that the syndicate’s results had benefited materially from some exceptional underwriting conditions in the early 2000’s, together with a very significant investment return of 59% of NPE in 2008. However, 5-year average indicative annual returns on capital excluding returns on FIS were in line with the B peer group. Moody's continued that a B (s) continuity opinion was also indicated by its internal scorecard, based on indicative annual returns on capital. With Moody’s internal scorecard indicating a B (s) continuity opinion and more recent indicative annual returns on capital currently in line with the B peer group, Moody's has therefore assigned a B^ (Average) continuity opinion to Newline syndicate 1218, reflecting Moody's Analytics view of relative performance and continuity prospects for the syndicate over the insurance cycle. The outlook for the continuity opinion is stable. It should be noted that the continuity opinion for syndicate 1218 (in contrast to most assigned continuity opinions) is based solely on public information or limited non-public information and that restricted access to data requested for the continuity opinion may have had a material impact on the assigned continuity opinion. The syndicate has declined Moody's invitation to participate in the opinion process, and has not communicated with Moody's on opinion-related issues for at least 12 months. 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