A.M. Best Affirms Ratings of Imagine Insurance Company Limited

Business Wire,  July 15, 2008  

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OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Imagine Insurance Company Limited (Imagine) (Barbados). The outlook for both ratings is stable.

The ratings reflect Imagine's global strategy, solid net returns since inception and strong support from its ultimate parent, Brookfield Asset Management, Inc. [NYSE:BAM]. Imagine offers reinsurance and insurance contracts for property/casualty and life/health products on both a traditional and non-traditional basis. When employing a traditional approach, risks are assumed using customary and standard market terms and conditions. For its non-traditional contracts, Imagine designs customized transactions to address the specific risks of the reinsured, incorporating risk mitigation features that may reduce the risk they assume in consideration of a lower premium or a profit sharing arrangement between Imagine and the reinsured.

BAM, one of the leading asset management and real estate companies, offers distinct advantages to Imagine including financial flexibility, access to intellectual capital and investment expertise. Through its subsidiaries, BAM offers Imagine alternative investment opportunities that complement its fixed income portfolio base. Imagine's investment strategy for assets backing its reserves is to construct a portfolio of high quality and liquid fixed income securities that matches closely to the duration of its insurance liabilities, thus reducing the company's interest rate and credit risk exposures.

Imagine's risk-based capitalization continues to be supportive of its current operating strategy. Operations are further supported by disciplined risk management controls, along with sophisticated pricing and portfolio management systems.

Offsetting these strengths are concerns with the potential operational risk associated with a small number of non-traditional reinsurance deals considered finite. The number of actual finite contracts has been steadily declining, and it should be stressed that the vast majority of Imagine's transactions do not fall under the strict definition of finite risk products. Most of Imagine's portfolio includes traditional reinsurance arrangements with an element of risk transfer, which includes contractual caps or other loss mitigating features. Furthermore, Imagine will be challenged to sustain acceptable profit margins in the current soft pricing environment while competing with larger companies in its targeted markets.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

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.

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