Best Affirms ‘B+’ Rating of Inter-Industry & Insurco

April 8, 2004

A.M. Best Co. announced that it has affirmed the financial strength rating of “B+” (Very Good) of Inter-Industry Insurance Company Limited (III) (Isle of Man) and its wholly owned subsidiary, Insurco Limited, (formerly Manufactured Buildings Insurance Company Limited [MBI]) (Isle of Man).

“Insurco is regarded as a core subsidiary to III,” said Best. “At the same time, the rating of Agricultural & General Insurance Company Limited (AGI) (Isle of Man) has been withdrawn following the amalgamation of AGI and MBI to form Insurco in February 2004. The outlook has been revised to positive, reflecting the company’s improved capital position following exceptional results in 2003, bolstering its ability to absorb losses.”

Best noted that the “ratings reflect III’s improving risk-based capitalisation, strong but volatile operating performance and stringent underwriting and risk management controls. An offsetting factor is III’s lack of reinsurance protection.”

According to A.M. Best’s risk-adjusted capital model, III’s consolidated risk-adjusted capitalisation will “continue to rise through the retention of earnings (albeit from a relatively low base). However, III’s capital continues to be highly exposed to potential aggregation losses as the group has no reinsurance protection.”

Best called the company’s operating performance “strong but volatile,” and indicated that it is “expected to follow the experience of recent years, whereby the claims ratio has been low (five-year average of 52.2 percent) but volatile due to the limited size of the insured portfolio and the lack of reinsurance.” It added that “underwriting performance has been further impaired by III’s high expense ratio (48.1 percent in 2003), which includes part of the company’s risk management expenses and is not expected to decrease in 2004 as the company tries to maintain current standards of risk management and service.”

The rating agency concluded with the statement that it “considers the assessment of new clients to be market leading as it includes the scrutiny of products, operations and management standards with emphasis on risk management.”

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