[February 15, 2013]

A.M. Best Affirms the Ratings of Gateway Rivers Insurance Company

A.M. Best Co. has affirmed the financial strength rating of A-(Excellent) and issuer credit rating of "a-" of Gateway (News - Alert) Rivers Insurance Company (Gateway) (Burlington, VT). The outlook to both ratings is stable.

The ratings and outlook reflect Gateway's strong capitalization and conservative operating strategy. The ratings also consider the company's critical role and favorable profile as part of the AT&T (News - Alert) Inc. [NYSE: T] organization, as well as its excellent operating performance during the past five years, providing insurance coverage to subsidiaries of AT&T Inc. for certain property/casualty risks.

Partially offsetting these positive rating factors are Gateway's relatively large limits to its general and product liabilities as well as property lines of business. Nevertheless, A.M. Best recognizes the substantial financial resources of the AT&T Inc. organization.

A.M. Best views Gateway's management and corporate strategy as a major factor that strengthens its ratings, given the company's conservative underwriting, operational goals and transparency. A.M. Best also views Gateway's enterprise risk management practices as strong given their impact on the company's conservative risk culture, defined risk controls as well as providing optimization of its capital and surplus. Other factors A.M. Best considered in the rating process include, but are not limited to, the diversification in Gateway's line of busness and geography, as well as the support and commitment of the parent and the captive's mission.

A.M. Best expects Gateway's future operating performance to be stable but strong, and the stable earnings profile should further support the efforts to control its growth and business writings, which are consistent with its capital and surplus position.

Gateway's ratings and outlook are not expected to be upgraded and/or revised within the next 12-24 months as its operating performance and capital position already have been considered in the ratings process. A.M. Best could downgrade Gateway's ratings and/or revise the outlook if its Best's Capital Adequacy Ratio (BCAR) score declines, operating performance and risk profile deteriorate, insured losses deplete capital or significant changes and turnover occur in its management team and/or risk management controls and tolerances, or its parent's ratings deteriorate.

A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world.

For current Best's Credit Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "The Treatment of Terrorism Risk in the Rating Evaluation"; "Evaluating Non-Insurance Ultimate Parents"; and "Alternative Risk Transfer (ART)." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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