A.M. Best Affirms Ratings of Ocaso, S.A. Seguros y Reaseguros.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of "aa-" of Ocaso, S.A. Seguros y Reaseguros (Ocaso) (Spain). The outlook for both ratings is stable.

The ratings reflect the company's superior risk-based capitalisation, excellent operating performance and strong business profile. Partially offsetting these factors are the challenging market environment in Spain and the dependence on the funeral expenses business line.

Ocaso's risk-based capitalisation remains superior, having benefited from significant profit retention in recent years. However, Ocaso continues to strengthen reserves in respect of the existing funeral expense portfolio in order to meet regulatory requirements by 2013 for long-term policies. Notwithstanding this, A.M. Best believes that the company's largest line of business has very low volatility, thus limiting Ocaso's risk profile.

A.M. Best expects Ocaso's strong positive technical results to continue, driven by the limited underwriting risks of its funeral portfolio, cautious underwriting policy and expense control in other lines of business. Total net profits for 2007 increased for four consecutive years reaching EUR 79.6 million (USD 122 million) compared to EUR 36 million (USD 48 million) in 2003. A.M. Best expects the combined ratio to remain stable around 90% in 2008, although the expense ratio should increase marginally due to higher advertisement costs. Overall profits are likely to remain strong but moderately declining due to lower investment income partly impacted by the financial market environment, resulting in a return on equity within a range of 14% to 16% in 2008.

Ocaso continues to be one of the leading providers of funeral expenses in Spain, which is the company's main line of business, representing approximately 45% of gross written premiums (GWP)--EUR 720 million (USD 1110 million). In A.M. Best's view, Ocaso benefits from a strong brand and an extensive distribution network. Although the funeral expenses segment is becoming increasingly saturated, the company continues to grow in this business line (by 5% in 2007) as it seeks new niche opportunities, such as expanding into immigrant communities. Ocaso continues to diversify into the multi risks household and commercial insurance representing 31% of the GWP in 2007, benefiting from increasing demand in Spain. The company is also expanding rapidly in highly profitable accident and assistance business lines with a 12% growth in 2007.

Despite the strong competition in the Spanish non life market and the current economic environment, A.M. Best expects a fair total premium growth (life and non life) of 7% to approximately EUR 770 million (USD 1187 million) in 2008. In life, where the market is strongly dominated by bancassurance agreements, A.M. Best expects the company to grow by 5% in 2008 (after a -7.8% decrease in 2007) by renewing short-term single premium policies that matured in 2008.

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.