Nationale Borg-Maatschappij N.V.

November 13, 2007 Nationale Borg-Maatschappij N.V. Primary Credit Analyst: Neil Gosrani, London (44) 020 7176 7112; neil_gosrani@standardandpoors.com Secondary Credit Analyst: Kevin Willis, London (44) 20-7176-7085; kevin_willis@standardandpoors.com Table Of Contents Major Rating Factors Rationale Outlook Corporate Profile: Well-Established Niche Insurer For Dutch And Belgian markets Competitive Position: Strong Underwriting, But High Dependence On Reinsurance Management And Corporate Strategy: Knowledgeable Management Team With Strategic Focus On Geographic Diversification Enterprise Risk Management: Prudent Approach With Strict Underwriting And Monitoring Procedures Accounting: Extra Capital Sitting In The Antillean Subsidiary Operating Performance: Strong And Stable With Improvements In Key Ratios Investments: Highly Liquid And Well Diversified www.standardandpoors.com/ratingsdirect 1 Standard & Poor's. All rights reserved. No reprint or dissemination without S&Ps permission. See Terms of Use/Disclaimer on the last page. 613663 301023607

Table Of Contents (cont.) Liquidity: Net Underwriting And Operating Cash Flows Consistently Positive Capitalization: Very Strong Capital Adequacy With Reducing Exposure To Outward Reinsurance Financial Flexibility: Strong Profit Flows And Comprehensive Reinsurance Program Standard & Poor s RatingsDirect November 13, 2007 2 Standard & Poor's. All rights reserved. No reprint or dissemination without S&Ps permission. See Terms of Use/Disclaimer on the last page. 613663 301023607

Major Rating Factors Strengths: Strong capitalization and very strong capital adequacy Strong operating performance Well-established player with a successful track record in the niche Dutch and Belgian direct surety and fidelity markets and worldwide surety and credit reinsurance markets Financial Strength Rating Local Currency A-/Stable/-- Weaknesses: High reliance on reinsurance Dependence on small number of key employees Rationale The ratings on Netherlands-based direct surety and fidelity insurer and surety and credit reinsurer Nationale Borg-Maatschappij N.V. (NB) reflect the company's strong operating performance, strong competitive position in the niche Dutch and Belgian markets, and strong capitalization. These strengths are offset by NB's high reliance on reinsurance for additional underwriting capacity and its dependence on a small number of key employees. Capitalization is viewed as strong, benefiting from very strong capital adequacy and prudent reserving. Capital adequacy has benefited from retained profits and a benign claims environment. Capital is adversely impacted, however, by a high exposure to reinsurance. NB's strong and stable operating performance is reflected in its 10-year average net combined ratio of 86.8% and 10-year average net loss ratio of 51.8% and an improved ROR in 2006 of 39.8% (2005: 30.6%). NB's business is highly dependent on reinsurance to mitigate high severity loss events and provides additional capacity to write new business. In order to bring it more in line with the market, NB has replaced its variable surplus treaty with a quota share treaty, increasing the proportion of premium it retains to 50%. Although this reduces the amount of reinsurance used, exposure remains relatively high. NB is dependent on a small number of long standing, experienced employees. NB ensures work is carried out by small teams to avoid concentrations of knowledge and has proven in the past that it has the ability to attract suitably qualified individuals for key positions. Outlook The stable outlook reflects Standard & Poor's Rating Services' expectation that NB will maintain strong capitalization, strong operating performance, and a leading position in niche markets in which it is active. The loss ratio is not expected to exceed 40% in the medium term and operating results are expected to reflect the benefits of expansion into new markets and geographies on a sustainable basis. www.standardandpoors.com/ratingsdirect 3

Upward ratings pressure is limited and dependent on sustained strength and diversification of earnings. Downward ratings pressure, although not likely, may result if there is a material deterioration in long-term operating performance and capitalization. Corporate Profile: Well-Established Niche Insurer For Dutch And Belgian markets Established in 1893 and based in Amsterdam, NB is an established direct surety and fidelity insurer and surety and credit reinsurer, with a particular focus on the transport, logistics, and construction industries. The company provides insurance to Dutch and Belgian markets and reinsurance cover internationally. It was acquired by Egeria Capital B.V. and HAL Investments B.V. from ING Groep N.V. (AA-/Stable/A-1+) in 2006. In 2006, NB had gross premiums written (GPW) of 62.1 million (2005: 60.6 million), a rise of 2.5%, ROR of 39.8% (2005: 30.6%) and shareholders' equity of 79.5 million (2005: 66.2 million). Competitive Position: Strong Underwriting, But High Dependence On Reinsurance Table 1 Nationale Borg-Maatschappij N.V./Business Statistics -- Year ended Dec. 31 -- (Mil. ) 2006 2005 2004 2003 2002 Gross premiums written 62.0 60.6 55.0 51.4 38.9 Annual change (%) 2.5 10 7.1 32 6.5 Net premiums written 43.0 42.2 38.8 34.9 26.7 Annual change (%) 2.1 8.8 11.0 30.8 2.7 NB's competitive position is strong in its key Dutch and Belgian markets. Strong underwriting discipline and market knowledge, together with an established brand and product development, have enabled the company to maintain this position. NB is, however, highly dependent on reinsurance to support its underwriting and is exposed to industries that are partly correlated with macroeconomic cycles. In the Dutch guarantee market, NB is the largest nonbank player, with 9% of the market. Banks are estimated to have a market share of 85%; however, NB's competitive advantages are lower solvency requirements compared with banks, strong underwriting, and product features. The company has benefited from a low level of competition from other insurers in the Dutch market. Atradius (main operating entities are rated A/Stable/--) withdrew from the market in 2005 after sustaining losses and Interborg N.V., part of the Euler Hermes group (main operating entities are rated AA-/Stable/--), is approximately one-tenth the size of NB by GPW. Distribution of guarantee product uses a number of different channels including NB's Internet channel, Borg Online, which accounts for around 65% of total guarantee business, brokers, in-house relationship managers, and through the existing relationship with ING Bank. Relationship managers also provide inward reinsurance, while the majority of the fidelity business is distributed through independent insurance intermediaries. NB has developed a strong reputation as a reliable provider of reinsurance capacity and has benefited from a Standard & Poor s RatingsDirect November 13, 2007 4

hardening of reinsurance premium in recent years. NB views its reinsurance business supporting the guarantee business through the provision of market intelligence. It also views its exposure to international credit and surety markets as providing a stable and more diversified spread of risk compared with the more concentrated risks in its guarantee business. In 2006, assumed credit and surety reinsurance business accounted for 58% (2005: 59%) of total premiums written by NB. Prospective Following the change of ownership, Standard & Poor's expects NB to further develop its business through new bank distribution relationships, developing new products, diversifying geographically, increasing its brand awareness, and leveraging its existing online platform to service the needs of its high volume/low value clients as well as offering day-to-day administration and management of guarantees for third parties. Credit and surety reinsurance's portion of total premiums written is expected to be maintained at current levels. Management And Corporate Strategy: Knowledgeable Management Team With Strategic Focus On Geographic Diversification Management and corporate strategy are marginally positive factors for the rating due to the experienced and knowledgeable management team and strong earnings and claims paying record. Following the change of ownership in June 2007, one senior management change was announced with the return of Jos Kroon as Chief Executive Officer and the retirement of Floris Elias, who has become a member of NB's supervisory board. The changes in personnel are viewed positively for NB. Nevertheless, the company remains highly dependent on a small number of key people. Strategy NB's strategy of growing organically and profitably remains largely unaltered although the impetus for change has increased following the change of ownership, with the new shareholders placing greater emphasis on a number of key areas. NB seeks to gain a larger market share of direct surety and fidelity insurance in The Netherlands and Belgium and surety and credit reinsurance worldwide, and is looking to apply its business model to selected European markets. Employees have been incentivized to achieve this through a profit-sharing agreement when profits exceed a predetermined hurdle rate. This replaces a similar scheme with ING, but has the potential for greater remuneration for staff. Operational management NB continues to maintain strong operational management through a thorough understanding of the company's business and its environment. Following the change of ownership, some support functions such as human resources, which were previously supplied by ING, have been replaced by external providers. This has not resulted in a significant increase in overheads or man-hours expended. Financial management Overall financial management at NB remains unchanged and conservative. NB has set itself a long-term target ROE after tax of 12.5%. This has been met consistently, except in 2002 when returns were impacted by investment losses. www.standardandpoors.com/ratingsdirect 5

Following the change of ownership, there is a greater focus on the efficient allocation of capital to separate business lines to ensure profitability is maximized. A moderate dividend policy is expected, allowing for a reasonable increase in equity. The new shareholders have indicated their willingness to supply additional capital through retained profits or new shares, should there be a business need. Enterprise Risk Management: Prudent Approach With Strict Underwriting And Monitoring Procedures Standard & Poor's considers NB's enterprise risk management to be adequate for its size and risk profile. NB has always approached risk management independently and on a prudent basis with strict underwriting and monitoring procedures. This remains unchanged following the change in ownership. NB has a dedicated risk management department that focuses on planning, product development, pricing, and reinsurance purchase. The head of the department reports to NB's management board. NB has begun to develop risk models tailored to credit reinsurance and surety insurance to take a structured approach to evaluating risk. It continues to write surety business based on a zero-loss philosophy and its administrative systems are able to monitor limits on a real time basis. Reinsurance limits the maximum net loss to 6.3% or 1.3% of shareholders' equity per risk for guarantee and fidelity business, respectively. In the inward reinsurance business, NB continues to have no retrocession protection and no influence on direct insurers' risk management or monitoring procedures (such as limits and exposures). Furthermore, the credit insurance business is highly influenced by macroeconomic cycles. NB has demonstrated its ability to successfully manage these risks by writing mainly proportional reinsurance, by limiting exposure to 5 million per risk on a probable maximum loss basis, and by maintaining a high level of geographic and industry diversification in the portfolio. Accounting: Extra Capital Sitting In The Antillean Subsidiary NB reports under Dutch GAAP, as well as producing accounts according to IFRS. In analyzing these accounts, Standard & Poor's has shown shareholder funds net of dividends paid. NB retains deposits from those clients who represent higher-than-normal risks. These deposits ( 7.2 million at Oct. 1, 2007), held in trust accounts, are not reported on the balance sheet. NB is not allowed to consolidate its Antillean subsidiary, Antilliaanse Borg-Maatschappij N.V. (ABM), because it is not regulated by the Dutch insurance supervisor. The subsidiary reinsures approximately 12.5% of NB's surety and fidelity portfolio and writes a small amount of direct guarantee business. Over the years, profits have been accumulated in the Antillean company to the extent that around one-half of the NB group's capital base (the group comprising NB and ABM) now resides in this company. In assessing capital adequacy, this participation is not treated as an investment in associate companies, but as an investment in bonds, which represent 90% of the invested assets of ABM. Capital requirements for insurance risk are determined on the basis of the group exposure. Standard & Poor s RatingsDirect November 13, 2007 6

Operating Performance: Strong And Stable With Improvements In Key Ratios Table 2 Nationale Borg-Maatschappij N.V./Operating Statistics -- Year ended Dec. 31 -- (Mil. ) 2006 2005 2004 2003 2002 Total revenue 49.5 48.3 43.8 40.1 30.9 Operating result 19.7 14.8 13.7 7.9 6.3 Net income 16.1 11.1 10.0 5.9 5.4 ROR (%) 39.8 30.6 31.3 19.7 20.4 ROA (%) 11.0 8.3 9.0 6.3 6.1 ROE (%) 23.9 20.1 21.4 13.7 13.2 Loss ratio (%) 38.4 46.5 49.0 53.8 53.8 Expense ratio (%) 32.1 31.6 31.9 33.5 36.9 Premium refund ratio (%) 0.0 0.4 0.9 0.9 1.0 Net combined ratio (%) 70.5 78.5 81.8 88.2 91.6 Operating ratio (%) 55.8 63.1 70.1 71.9 75.3 NB continues to post a strong and stable operating performance. The 10-year average ROE and ROR have remained stable at 17% (2005: 17%) and 26% (2005: 25%), respectively. The overall combined ratio has continued to improve in 2006 to 70.5% (2005: 78.5%). In 2006, the low net loss ratio was a key driver in the overall result and is attributed to good underwriting and risk management. Fronting fees have also increased; however, these costs have been passed on to customers with little impact on business. The direct guarantee business continued to post strong results, with net premiums written (NPW) rising to 8.7 million (2005: 7.9 million). The extremely low net combined ratio of 18.4% (2005: 48.7%) is attributed to a lower than usual level of losses. The reinsurance business remains profitable and stable with NPW (2006: 35.1 million; 2005: 35.5 million) largely unchanged from the previous year. The slight deterioration in the net combined ratio to 86.2% (2005: 83.3%) is attributed to increased commission payments; however, it remains at a historical low. The fidelity business, although small, continues to post stable results with a low level of losses. The contribution to underwriting profits by product line remains largely unchanged and comprises 48% from reinsurance, 42% from surety, and 10% from fidelity. Prospective NB will continue to post a strong performance, although management expects GPW to remain stable in the short term, attributing this to the change of ownership. NB's prospective operating performance should benefit from the distribution diversification resulting from the change of ownership, increased marketing, introduction of new products, and planned geographical diversification. NB expects the current favorable economic climate of modest growth to continue for a further three years. Operating performance could be adversely affected by execution risk arising from geographical diversification of the www.standardandpoors.com/ratingsdirect 7

business as well as the risk of unexpectedly large losses. These are mitigated by an experienced management team and effective underwriting processes and reinsurance protection. Investments: Highly Liquid And Well Diversified Table 3 Nationale Borg-Maatschappij N.V./Investment Statistics -- Year ended Dec. 31 -- (Mil. ) 2006 2005 2004 2003 2002 Portfolio composition (%) Real estate 4.0 4.2 4.9 3.6 4.3 Shares 16.7 11.4 10.8 13.9 19.1 Affiliates 25.3 23.5 25.3 30.0 33.8 Registered bonds 42.0 48.2 42.6 35.6 30.0 Loans 0.0 1.4 2.5 3.3 0.0 Cash and bank deposits 2.5 3.5 7.1 5.6 3.6 Deposits with cedents 7.7 7.8 6.9 8.1 9.1 Other invested assets 1.7 0.0 0.0 0.0 0.0 Total 100.0 100.0 100.0 100.0 100.0 Portfolio performance Net investment income 6.5 6.1 5.0 5.1 4.1 Running yield (%) 4.7 4.9 5.0 6.2 5.4 Total yield (incl. unrealized gains) (%) 4.6 5.1 5.7 6.1 (0.2) NB's investment portfolio is highly liquid and well diversified. This includes the investment in affiliates, which represents ABM and principally consists of investments in investment-grade shares, bonds, and cash. ING Investment Management continues to manage the portfolio and use a strategic asset allocation model, together with investment guidelines supplied by NB, to determine allocations in particular asset classes. Market risk The overall portfolio carries low market risk, although allocation in equities has risen to 16.7% (2005: 11.4%). Credit risk The credit quality of the bond portfolio is high, with 97% invested in investment-grade bonds (89% rated 'A' or higher and 65% rated 'AA' or higher). NB's portfolio is subject to regular reviews and benchmarking against projected returns. Liquidity: Net Underwriting And Operating Cash Flows Consistently Positive Table 4 Nationale Borg-Maatschappij N.V./Liquidity Statistics -- Year ended Dec. 31 -- (Mil. ) 2006 2005 2004 2003 2002 Underwriting cash flow ratio (%) 150.3 146.6 148.7 134.1 126.0 Standard & Poor s RatingsDirect November 13, 2007 8

Table 4 Nationale Borg-Maatschappij N.V./Liquidity Statistics(cont.) Operating cash flow ratio (%) 114.0 129.1 125.0 143.6 128.6 Liquid assets/technical reserves (%) 151.0 154.6 137.5 106.3 98.5 Liquidity is viewed as strong. Net underwriting and operating cash flows remain consistently positive; however, in 2006 operating cash flow fell to 113.8% as it was affected by dividend payments to ordinary shareholders of 10.6 million (2005: 4.8 million), which was a part of the acquisition price. NB maintains a highly liquid investment portfolio as well as the option of making cash calls on reinsurers, if such a need arises. The company holds sufficient cash to manage day-to-day business; however, 10 claims in excess of 500,000 submitted simultaneously could cause a liquidity strain on NB's resources. The probability of this happening is remote and has no precedent in the company's history. Capitalization: Very Strong Capital Adequacy With Reducing Exposure To Outward Reinsurance Standard & Poor's views NB's capitalization as strong, with very strong capital adequacy and prudent reserving, but a continuing high but reducing exposure to reinsurers. This applies in particular to the direct surety business and is in common with other credit insurers. Capital adequacy NB's capital adequacy ratio, as measured by Standard & Poor's capital model is stable and very strong. Capital adequacy has benefited from the maintenance of a debt-free balance sheet and a benign claims environment, which has resulted in lower claims paid ( 16.5 million in 2006 from 19.3 million in 2005) and higher retained profits. Shareholders wish to see NB maintain capital to support the current rating and have stated additional capital is available if there is a business requirement. Historically, capital was not allocated to different lines of business; however, NB's management now reviews this on an annual basis as a part of the strategic direction of the company. NB uses the capital models of both Standard & Poor's and De Nederlandsche Bank, the Dutch financial regulator, to assess capital adequacy. Capital quality, although backed with a debt-free conservative balance sheet, is negatively affected due to the high but declining dependence on reinsurance. This is mitigated by NB's decision in 2007 to revise their reinsurance terms to retain a greater portion of premium. Reserves Standard & Poor's considers that NB uses prudent reserving practices. This remains unchanged from previous years and an external auditor tests reserving assumptions regularly. Reinsurance NB is an extensive user of reinsurance for its surety and fidelity business lines. NB maintains a diversified and high quality panel of reinsurers, led by Munich Reinsurance Co. (AA-/Stable/--) and rated 'A' or higher. The panel is regularly reviewed to ensure that concentrations do not develop and that counterparty quality is maintained. In 2007, the company changed the basis of its reinsurance protection to bring it closer in line with the rest of the market and to have greater certainty on premium income and the level of capitalization required. www.standardandpoors.com/ratingsdirect 9

A quota share treaty is now in place with retention at 50% and excess of loss cover. This limits NB's retention to 5 million per risk. NB is expected to increase premium retention in its direct business to 50% from the current 35%-42%. This will also reduce the cost of reinsurance and is expected to add an additional 1 million pretax profit per year. NB also has stop loss cover with ING Re; however, given the ability of the company's capital base to absorb losses, the future benefit of this facility relative to its cost is under review. Financial Flexibility: Strong Profit Flows And Comprehensive Reinsurance Program Table 5 Nationale Borg-Maatschappij N.V./Financial Statistics -- Year ended Dec. 31 -- (Mil. ) 2006 2005 2004 2003 2002 Total assets 149.5 144.4 123.4 98.7 87.3 Total adjusted equity 68.9 61.4 50.7 44.3 36.9 Change in adjusted equity (%) 12.2 21.2 14.6 20.0 (3.3) Solvency ratio (%) 160.2 145.6 130.7 126.6 138.1 Technical reserves/net premiums written (%) 130.9 130.4 129.6 132.3 150.2 Technical reserves/adjusted equity (%) 81.7 89.6 99.2 104.5 108.8 Investment leverage (%) 41.8 34.2 35.5 35.3 47.6 Affiliated investment leverage (%) 92.9 85.8 92.6 95.9 116.2 Reinsurance utilization ratio (%) 30.6 30.3 29.5 32.0 31.3 Financial flexibility is viewed as strong given NB's strong debt-free balance sheet, reserves, and additional capacity provided by the reinsurance program. The new shareholders have indicated their willingness to supply additional capital through retained profits or new shares, should there be a business need. NB also maintains bank liquidity lines and a fronting facility provided by ING Bank NV (AA/Stable/A-1+), the net cost of which has increased modestly following the change of ownership. Ratings Detail (As Of November 13, 2007)* Nationale Borg-Maatschappij N.V. Financial Strength Rating Local Currency Counterparty Credit Rating Local Currency Holding Company A-/Stable/-- A-/Stable/-- None Domicile Netherlands *Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country. Additional Contact: Insurance Ratings Europe; InsuranceInteractive_Europe@standardandpoors.com Standard & Poor s RatingsDirect November 13, 2007 10

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