A.M. Best Affirms FSR for New Zealand Local Government Insurance Corp. Ltd. – Civic Assurance

October 25, 2004

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of New Zealand Local Government Insurance Corporation Limited (Civic Assurance). The outlook is stable.

The rating reflects the company’s prudent capitalization, adequate liquidity and improved underwriting performance. The rating also considers the company’s ability to preserve its low loss and expense ratio over the last five years, as well as its well positioned reinsurance protection.

Civic Assurance is a niche insurer that specializes in offering insurance coverage to more than 80 percent of New Zealand’s local government authorities. The strength of Civic Assurance’s risk-adjusted capitalization is evident in its outstanding Best’s Capital Adequacy Ratio (BCAR) and the conservative net premium leverage ratio of 0.18 times.

These strengths are partially offset by vulnerability to natural catastrophe losses and concentration of risk in the market.

Given that the company’s functions are similar to those of a managing agent rather than a conventional insurer, Civic Assurance relies upon its reinsurance protection.

Civic Assurance focuses only on providing insurance products and risk financing facilities to local government authorities and public sector organizations. The shareholders of the company, all being local authorities, are under no obligation to insure with Civic Assurance; therefore, such designated customer base would possibly undermine its long-term business growth in the competitive New Zealand marketplace.

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