LIGHTYEAR DELOS GROUP

Wilmington, Delaware, United States

120 West 45th Street`, 36th Floor, New York, New York, United States 10036-4041

Tel:   212-702-3700 AMB#:   18717

Fax:   212-702-9279

Report Revision Date: 07/02/2007

BEST'S RATING

Based on our opinion of the company's Financial Strength, it is assigned a Best's Rating of A- (Excellent).

RATING UNIT MEMBERS

Lightyear Delos Group		(AMB# 18717):
AMB#	COMPANY	RATING
03758	Delos Insurance Company	A- g
13825	Naxos Insurance Company	A- r

RATING RATIONALE

Rating Rationale: The rating of Lightyear Delos Group is based on the consolidated operations of Delos Insurance Company and its wholly-owned subsidiary, Naxos Insurance Company. The rating reflects the group's strong risk-adjusted capital position, improved operating returns, and the targeted earnings and capital accumulation projections set forth by management. In addition, the rating recognizes the successful track-record of its executive team in managing profitable insurance company operations. The rating outlook is based upon the expectation for continued operating profitability and management's intent to adhere to strict underwriting fundamentals while prudently managing its capital in accordance with levels previously discussed with A.M. Best.

Somewhat offsetting these positive attributes is the historically high level of gross operating leverage carried by the group, and to some degree, the uncertainty related to the long-term profitability of the book of business. Business has been ramped up since 2002 as the group continues to focus on writing direct insurance policies through program managers and general agents. The group has demonstrated underwriting discipline by limiting the number of programs it underwrites. A.M. Best will continue to monitor gross operating leverage to ensure measures remain commensurate with expectations. A.M. Best will also monitor the group's performance to ensure that capitalization remains supportive of the rating.

Best's Rating: A-

Outlook: Stable

FIVE YEAR RATING HISTORY

	Best's
Date	Rating
07/02/07	A-

BUSINESS REVIEW

Lightyear Delos Group is based on the consolidated operations of Delos Insurance Company and its wholly-owned subsidiary, Naxos Insurance Company (Naxos). Delos Insurance Company (Delos), formally known as Sirius America Insurance Company (Sirius America), was acquired by an investor group led by Lightyear Capital in August 2006. Concurrent with this transaction, the company changed it's name to Delos Insurance Company as required under the Agreement of Sale. Sirius America was formerly a member of the White Mountains Insurance Group. As part of the transaction with Lightyear, White Mountains maintain, a significant equity investment in the company. In April 2007, Delos created a new excess and surplus (E&S) lines company, Naxos. Naxos provides more rate and form flexibility, additional capacity and innovative underwriting. Operations at Naxos will be managed under terms of a management agreement with Delos.

The group will continue to be focused on program insurance, including less volatile, homogenous lines of insurance business. Targeted classes of business include intermediate-tail specialty commercial lines, commercial auto, group stop loss and other specialty lines. Prior to 2000, the majority of Sirius' business represented reinsurance assumed from Gerling Global Reinsurance Corporation of America (formerly Constitution Reinsurance Corporation) under various quota share reinsurance agreements which have since been commuted.

Delos is licensed to write direct insurance and reinsurance in 51 jurisdictions. Business is underwritten through a limited number of program managers with the focus being on opportunities that leverages the program managers underwriting expertise and servicing capabilities. The group's niche is to focus on programs that write a single line of business in one or multiple states or multiple lines of business in a single state. While a third of the group's business is ceded to reinsurers, the group participates, at various levels of retentions, in each program that it underwrites.

Program managers provide various services to the group, which include rate and form filing, underwriting, claims and marketing services. The group controls this business through the active management of program managers who are provided with stringent underwriting guidelines. Additionally, the group has developed monitoring mechanisms from which to track program managers performance on a monthly basis and has implemented an aggressive auditing process to ensure that underwriting guidelines are followed. Furthermore, the group's strategy is to provide program managers with an active stake in the business they produce by supplementing low upfront commissions with profit commissions that fluctuate with results.

FINANCIAL PERFORMANCE

Gross and net premiums written grew earlier in the period as the group focused on establishing a presence in program business. However, in recent years premium writings have leveled off and most recently decreased due to the decision to exit commercial general liability business in New York, effective December 31, 2005. Profitability measures have been varied and were adversely impacted by the growth in premium volume and the associated statutory strain of recognizing underwriting expenses upfront. The group's relatively immature book of program business needs more time to develop before true profitability trends can be determined.

CAPITALIZATION

Based on Best's Capital Adequacy Ratio (BCAR), the group maintains strong capitalization supportive of its current rating. To support capitalization and the group's business plan, the new investor group contributed an additional $86 million to the company in August 2006. The group has also obtained indemnification from White Mountains for certain reinsurance recoverables and for loss reserves for all accident years prior to 1998 including asbestos and environmental liabilities. Further supporting the group's capital is accident year stop loss reinsurance protection provided by a former affiliate, Sirius International Insurance Corporation.

As of the June 30, 2007 the group reported capital and surplus of $200M. The financial size category (FSC), as of June 30, 2007, is therefore Class VIII. Assuming surplus remains above $100 million through the third quarter, the report will reflect the FSC of VIII upon the filing of the group's third quarter statutory statement.

LIQUIDITY

The group's liquidity measures compare favorably to the industry composite and is supported by strong operating cash flows. The group maintains a conservative investment portfolio, with investments in government bonds predominating. The group's high quality fixed income portfolio is supplemented by equity investments, which represent about 7.6% of invested assets.

REINSURANCE PROGRAMS

The group uses reinsurance to minimize its risk position and manage insurance leverage ratios. The group purchases reinsurance on an individual program basis with a preference towards quota share protections. If deemed necessary, the group will purchase excess of loss protection on individual programs to further limit its risk exposure. In general, the group cedes off close to a third of the business that it underwrites with the group's retention varying depending on the reinsurance structure. In line with the growth in the group's premium volume, recoverables have grown substantially in recent years. The groups reinsurers are generally of high quality with recoverables from non-U.S. reinsurers, including recoverables from its former affiliate, Sirius International Insurance Corporation, being collateralized with letters of credit or funds held.