A.M. Best Affirms Rating of UIA

July 18, 2002

A.M. Best Co. affirmed the financial strength rating of “A-” (Excellent) of UIA (Insurance) Limited, United Kingdom.

The company’s excellent level of surplus and its niche position in the U.K. household insurance market prompted the affirmation. A.M. Best also views UIA’s implementation of a diversification strategy as a positive. Offsetting factors include the volatility associated with the company’s high exposure to equities and limited financial flexibility.

The company has maintained an excellent surplus position and A.M. Best believes it has sufficient capacity to expand in line with its business plan. Financial flexibility remains restricted, however, due to the company’s mutual status.

It’s core business segment continues to be U.K. household insurance, which accounted for 96.3 premium of net premiums (GBP 22.3 million (U.S. $33.4 million) in 2001.

UIA will continue to benefit from its solid, long-standing relationship with UNISON, the U.K.’s largest trade union. UIA has provided insurance products to UNISON members for over 100 years and maintains a very high (90 percent) member retention. It acquired Uniservice—a U.K. household provider to a number of small trade unions—in 2000, which contributed GBP 5.0 million (U.S. $7.5 million) to total gross premiums in 2001. The company is actively looking for additional acquisitions and A.M. Best views the plans for diversification as positive.

A.M. Best believes UIA has a volatile investment portfolio with high exposure to equities (64 percent in 2001), a condition that has led to decreased investment returns.

The company is expected to experience moderate growth, with gross premiums written increasing to approximately GBP 35.0 million (U.S. $52.5 million) by 2004.

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