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A.M. Best Upgrades Ratings of AMI Insurance

A.M. Best Upgrades Ratings of AMI Insurance Limited

OLDWICK, N.J. (BUSINESS WIRE) October 10,2008

A.M. Best Co. has upgraded the financial strength rating to A+ (Superior) from A (Excellent) and the issuer credit rating to aa- from a+ of AMI Insurance Limited (AMI) (New Zealand). The outlook for both ratings has been revised to stable from positive.

The ratings are based on an analysis of the consolidated financial accounts of the AMI Members Trust, of which AMI is the only operating entity. The ratings reflect AMI s well-established market position, solid risk-adjusted capitalization, consistent operating profitability and corresponding surplus accumulation.

AMI has a strong business profile in personal lines, particularly in the private motor business. In fiscal year 2008, the company continued to maintain its strong market position in the private motor market and has maintained a similar market profile over the last three years. AMI s stable business profile is supported primarily through its extensive branch network across New Zealand. As evident in the company s business growth, premium volume has consistently been increasing throughout the past decade and averaged 6.4% over the past five years.

AMI s capital position remained solid as reflected in its moderate underwriting leverage and strong risk-adjusted capitalization as measured by Best s Capital Adequacy Ratio (BCAR). The net premium leverage ratio continuously improved over the past five years to 0.83 times in fiscal year 2008 from 1.15 times in fiscal year 2004. A.M. Best believes stable operating profitability, high retention of net earnings and moderate business growth will support AMI s stable capital position going forward.

Sound underwriting profitability coupled with strong investment returns has resulted in consistent profitability for AMI. Due to minimal rate increases in personal lines business and higher incident of losses in the domestic lines, the underwriting surplus decreased to NZD 5.4 million (USD 4.1 million) in 2008 from NZD 15.6 million (USD 12.0 million) in the previous year. Despite the narrowing of the underwriting margin, AMI's investment portfolio returned NZD 35.8 million (USD 27.3 million), and the company achieved a net operating surplus after tax of NZD 26.9 million (USD 20.5 million) for fiscal year 2008. Return on capital and surplus was 8.6% in fiscal year 2008 and averaged 12.3% over the past five years, further demonstrating AMI s consistent operating profitability.

Partially offsetting these positive rating factors for AMI is the lower underwriting margin and the weakening economic environment of the New Zealand market.

Although AMI s underwriting margin was pressured by upward trending losses, the company s expense ratio remained low and decreased to 26.3% in fiscal year 2008, from 27.2% in the previous year. Prospectively, A.M. Best anticipates the ongoing control of operating expenses coupled with the prevailing premium rate movements in personal lines will lessen the strain on AMI s underwriting margin.

Going forward, AMI s business generation might be adversely affected by the sluggish economic activities. Nonetheless, the company s operational profitability will likely remain due to a sound quality insurance book of business and conservative investment practice.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

ENDS

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