A.M. Best Affirms Rating of ACE Insurance Limited, New Zealand.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of ACE Insurance Limited (ACENZ) (New Zealand). The outlook is stable.

The rating reflects ACENZ's good operating performance, high liquidity and conservative investment strategy. The rating also considers the strengthened capital position and the reduced leverage ratio.

Benefiting from sound underwriting results, ACENZ's net profit increased 133% to NZD 16.8 million (USD 11 million) in fiscal year 2003. Despite the competitive insurance market, the underwriting margin increased to 33% in fiscal year 2003, compared with 16% in fiscal year 2002. The company had one of the lowest loss ratios among main players in the general insurance market in New Zealand. The combined ratio declined to 67% in fiscal year 2003 from 84% in the previous year. Both the combined and operating ratios were very favorable over the past two years.

ACENZ had a liquid investment portfolio, with 17% of its total assets in cash and 51% in government or other fixed interest securities as of fiscal year 2003. The operating cash flows have been maintained at a good degree of financial flexibility. The company does not have any exposure to equity markets.

The company has improved its capital position with steady growth in recent years. The Best's Capital Adequacy Ratio, which measures capitalization on a risk-adjusted basis, demonstrates that the company maintained a strong capital position. It provides further comfort that the net premium leverage ratio dropped substantially from 3.44 times in fiscal year 2000 to 1.35 times in fiscal year 2003.

Partially offsetting these positive rating factors are the small market shares and the intense competition in the New Zealand market.

Given the company's existing underwriting capacity and market size, the scope for business growth is limited. In fact, the market competition in New Zealand's general insurance industry remains very intense. These factors will exert pressure on the company's overall operating results and profitability.

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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 http://www.ambest.com.