Best Affirms Colonial Group Ratings

December 6, 2006

A.M. Best Co. has affirmed the financial strength rating (FSR) of “A-” (Excellent) of the Bermuda-based Colonial Group and its group-rated members. Best also affirmed the stand-alone FSRs of “A-” (Excellent) of the Security & General Insurance Company Limited (S&G) and of the British Caymanian Insurance Company Limited (BCIC). The outlook for all ratings is stable.

“The rating of the Colonial Group reflects the group’s favorable risk-adjusted capitalization, excellent liquidity and expanding geographic profile,” said Best. “The Colonial Group has a strong presence in the Bermudan property/casualty and health market (equaling over 35 percent of the group’s total premium), as well as in the Bahamian market, where its subsidiary, Atlantic Medical Insurance Company Limited, is the leading medical insurer.”

Best noted that the “Colonial Group’s historically sporadic operating returns, fluctuating investment performance and its continued exposure to severe catastrophe losses inherent within the markets it serves,” constitute offsetting factors.

“The rating of S&G reflects its conservative underwriting leverage, improved underwriting strategies, proven parental support, renewed balance sheet strength and solid operating performance,” Best continued. “Partially offsetting these factors is S&G’s business concentration, which exposes it to fluctuating market conditions as well as to frequent and severe storms.

“BCIC’s rating is based on its historically profitable underwriting results, conservative underwriting leverage and the explicit and implicit support it receives from its parent, the Colonial Group. The rating also recognizes its adequate level of capitalization and earnings posture.

“Partially offsetting these positive attributes are the company’s dependence upon reinsurance and the elevated investment leverage in equities, which historically weakened investment results and tempered BCIC’s overall profitability and surplus growth. Furthermore, BCIC remains susceptible to both frequency and severity with respect to wind storms as evidenced by Hurricane Ivan in 2004.”

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