Best Affirms Rating for Wawanesa Mutual Insurance Co.

September 22, 2005

A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) of Wawanesa Mutual Insurance Company (WMIC) (Winnipeg), including its branch, The Wawanesa Mutual Insurance Company, (United States Branch) (San Diego, Calif.). In addition, A.M. Best has affirmed the FSR of A+ (Superior) of Wawanesa General Insurance Company (WGIC) (San Diego, Calif.). The outlook on all ratings is stable.

The rating of WMIC is based on its superior level of capitalization, strong operating performance and leading market position in the Canadian property/casualty sector. The rating also reflects its well diversified book of business, sound risk management and experienced management team.

The rating of WGIC is based on its strong strategic position within the Wawanesa group, its excellent capitalization, improved operating performance and the explicit financial support of its parent.

These rating strengths are offset in part by the challenges these companies face in the personal lines automobile markets due to regulatory changes, competitive market pressures, below average interest rates and the historically weaker operating performance of WGIC in the United States.

WMIC ranks first among property/casualty insurance companies in Canada in terms of capital and surplus. Despite significant storm losses in 2005, the company maintains a superior surplus base supported by operating profitability and significant unrealized gains in its investment portfolio.

Furthermore, WMIC seems well positioned to remain strong through the apparent downturn in the underwriting cycle. WMIC’s long-term relationships with brokers and responsive customer service have helped it achieve its market leadership position and helped the company maintain a strong regional presence and a high customer retention rate.

Recent regulatory changes in the company’s primary automobile insurance markets in Canada appear to have had a positive impact on underwriting performance in that line; however, A.M. Best remains cautious about the long-term effects these changes will have.

WGIC’s underwriting results have not performed as well as its parent’s since its inception; however, results have improved primarily due to hard market pricing, and A.M. Best anticipates continued improvement and support as needed from WMIC.

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