Best Ratings Report

Editor's note: This information is courtesy of A.M. Best Co. For further information, visit www.ambest.com/ratings.

A.M. Best Co. has revised the rating outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-”of Southern States Insurance Exchange (SSIE/the Exchange) (Richmond, VA).

The rating reflects SSIE’s excellent balance sheet strength, history of operating profitability and proven underwriting expertise in its niche market. Partially offsetting these positive rating factors is SSIE’s limited market profile as it provides coverage to a specific population of customers relating to the agricultural industry.

The Exchange derives approximately one-half of its in-force premiums from its founder and largest subscriber, Southern States Cooperative (SSC) and approximately 48% of capital and surplus consists of the subscriber savings accounts of SSC. SSC and SSIE have been successfully aligned business affiliates since inception, which spans more than a half century. The attorney-in-fact operating the Exchange is wholly owned by SSC, as is the independent insurance agency that represents the Exchange on a fairly exclusive basis.

SSIE maintains a competitive expense advantage derived from its direct distribution system and strict underwriting and loss control guidelines. It maintains a high subscriber retention rate, partially due to its history of sharing profits as well as its strong client services.

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A.M. Best Co. has affirmed the financial strength rating (FSR) of B (Fair) and the issuer credit rating (ICR) of “bb” of Pioneer Insurance Company Limited (Pioneer) (New Zealand). The ratings have been removed from under review with developing implications and assigned a stable outlook.

These rating actions follow the NZD 8.4 million (USD 6.6 million) injection of funds over the past year, of which NZD 2.523 million (USD 1.98 million) was in the form of convertible capital notes. The ratings also reflect the substantial operation, management and corporate governance improvements that Pioneer’s new owner, the New Zealand Association of Credit Unions, has effected.

A.M. Best remains cautious of Pioneer’s ability to maintain its current weak business profile in light of the strong competition within its market niche. Nonetheless, A.M. Best expects Pioneer will maintain a favorable risk-adjusted capitalization and operating performance relative to its current rating level.

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A.M. Best Co. has revised the rating outlook to positive from stable for Central Reinsurance Corporation (Central Re) (Taiwan). At the same time, A.M. Best has affirmed Central Re’s financial strength rating of A- (Excellent) and issuer credit rating (ICR) of “a-”.

The ratings reflect Central Re’s strengthened risk-based capitalization, continuous improvement in risk management and stable operating performance. The ratings also recognize the company’s continued efforts in strengthening its overseas market presence in recent years.

Central Re’s net premium leverage ratio (net premium written over adjusted capital and surplus) improved to 1.08 times due to higher retained earnings and an increase in equalization reserve in 2007. The company’s
adjusted capital and surplus (including equalization reserve) increased to TWD 12,055 million (USD 370 million) as at year-end 2007. In A.M. Best’s view, the company’s risk-adjusted capitalization is sufficient to support its current ratings as demonstrated by Best’s Capital Adequacy Ratio (BCAR).

Central Re launched its enterprise risk management (ERM) program in 2004. A.M. Best noted that Central Re has incorporated the results of its risk management model in its strategic decision-making process. A.M. Best
believes that a sound risk management program would help the company to better manage its risk exposure, leading to higher efficiency in capital management.

Central Re has maintained profitable and stable underwriting results with a combined ratio falling within the 90%-97% level in the past five years. Given that Taiwan is a catastrophe-prone country, Central Re’s stable and consistent operating performance has demonstrated its prudent underwriting control and risk management practice.

Offsetting factors are the competitive market condition and limited reinsurance business growth in Taiwan.

Central Re has expanded its business to overseas reinsurance markets in recent years. Given the competitive environment in the reinsurance market in Asia, A.M. Best believes that it will be a challenge for Central Re to develop its market presence with meaningful scale and profitability in overseas markets. Nonetheless, A.M. Best will continue to monitor the progress of the company’s overseas expansion plan.

Central Re focused mainly on the domestic reinsurance market, with 94.6% and 93.5% of its gross premiums written generated from Taiwan in 2006 and 2007, respectively. Due to the market consolidation and higher premium retention in Taiwan’s direct insurance market, the size of the reinsurance market in Taiwan has been shrinking in the past four years. Central Re’s business growth is limited by the domestic reinsurance market.