A.M. Best Revises Outlook to Positive for Pacific International Insurance Limited

Business Wire, May 5, 2008

OLDWICK, N.J. -- A.M. Best Co. has revised the outlook to positive from stable for the ratings of Pacific International Insurance Limited (PII) (New Zealand). Concurrently, A.M. Best has affirmed PII's financial strength rating of B (Good) and issuer credit rating of "bbb-".

The rating affirmations reflect PII's favorable operating results and persistent improvement in risk-adjusted capitalization. The ratings also consider the company's stable near-term earnings prospects.

The revision of PII's rating outlook reflects its stable earnings prospects from its niche underwriting expertise and continued strong presence in its core underwriting segment. PII's capital and surplus on an absolute basis have increased approximately 2.5 times since 2005, and A.M. Best expects the company's stable earnings prospects to foster surplus accumulation in the near future.

With a five-year average combined ratio and loss ratio of 64.9% and 25.9%, respectively, PII's operating performance has been highly profitable since fiscal year 2002. Due predominantly to retention of operating earnings, the company's risk-adjusted capitalization improved in 2007, as measured by Best's Capital Adequacy Ratio.

Offsetting rating factors include PII's potential exposure to multiple large claims, short operating history and the uncertainty associated with expanding into new markets.

PII's reinsurance is structured on an excess of loss basis with a relatively large retention per claim, and the arrangement potentially exposes the company's capitalization to multiple large claims. In spite of the claim exposure, significant surplus accumulation over the past three years lowered the retention per risk to approximately 4% of PII's capital and surplus for fiscal yearend 2007 as compared to 10% as at fiscal year end 2005.

PII's continual expansion into new markets may expose the portfolio to additional risk dimensions, although premiums written from these markets remain relatively small compared to the overall portfolio. In view of the current scale of PII's book, A.M. Best has some concerns regarding the potential volatility of PII's underwriting experience as the portfolio develops.

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.