A.M. Best Affirms Financial Strength Rating of Consumer Insurance Services Limited.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Consumer Insurance Services Limited (CISL) (New Zealand). The rating has been removed from under review and assigned a stable outlook.

The rating reflects the company's liquid investment portfolio, distribution support from parent entities, consistent operating performance and its recent capital injection.

CISL has maintained favorable operating performance with limited volatility. Net earnings are principally supported by superior underwriting results with a low level of claim experience over the last few years. The five-year average combined ratio is below 70%.

As an integral part of Fisher and Paykel Finance (F&P Finance), CISL benefits from the operational synergy and the well-established brand name of its parent. At minimal cost, CISL is able to access F&P Finance's broad spectrum of consumers across New Zealand.

CISL maintains strong liquidity within its investment portfolio. As of March 2004, the amount of cash and bonds accounted for about 71% of the company's total assets. The recent increase in its paid-up capital by NZD 1.5 million (USD 0.97 million) has further strengthened the capital position of the company.

Offsetting factors include the ongoing aggressive dividend payout, the concentration of business risk in limited lines of business and the increase in its underwriting leverage ratio.

Despite its current profitable position, the repatriation of significant profits from CISL to its shareholders in recent years has limited the growth of its surplus position. The five-year dividend payout ratio averaged 108%. The combination of a low level of retained earnings and steady premium growth has weakened the company's underwriting leverage over the past few years. However, this position has been improved by the recent capital injection of NZD 1.5 million (USD 0.97 million).

With the low entry barrier of new players into the consumer finance market, CISL is faced with various challenges to compete with other local finance companies to secure higher market share. Furthermore, its business concentration in consumer credit insurance products might further restrict its future business growth and profitability if a potential fluctuation in the demand of consumers' loans in New Zealand occurs.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.