Best Affirms Inter-Industry; Insurco Ltd. Ratings; Revises Outlook to Stable

April 11, 2005

A.M. Best Co. announced that it has affirmed the financial strength ratings of “B+” (Very Good) of Inter-Industry Insurance Company Limited (III) and its wholly owned subsidiary, Insurco Ltd. (Insurco). Both companies are domiciled on the Isle of Man.

Best also assigned an issuer credit rating of “bbb-” to III with a stable outlook, and revised its outlook on the financial strength ratings from positive to stable.

“The ratings reflect III’s continued very good risk-adjusted capitalisation, despite lower than originally anticipated profitability levels,” said Best. “An offsetting factor is the company’s limited business profile.” Best also noted that it “views Insurco as integral to III’s strategy.”

The announcement indicated that the “company’s business position is expected to remain limited as it continues to originate its risks from a small number of insureds, written through Insurco.” Best said it “believes that the lack of reinsurance cover in excess of the current claim limit of $2 million restricts the company’s ability to attract larger risks. Furthermore, the lack of reinsurance protection of its own retention results in earnings volatility.”

Best also noted that reported pre-tax profits are likely to stabilize around $700,000, “as the company smooths the impact of prospective large losses through the build up of additional claims reserves. Risk adjusted capitalisation remains very good, despite III distributing dividends in excess of its net profits in 2004.” Best aid it “expects capitalisation to be maintained at current levels.”

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