A.M. Best Assigns Ratings to Tapiola General Mutual Insurance Company.

OLDWICK, N.J. -- A.M. Best Co. has assigned a financial strength rating of A (Excellent) and an issuer credit rating of "a" to Tapiola General Mutual Insurance Company (also known as KeskinEninen VakuutusyhtiE Tapiola) (Finland). The outlook for both ratings is stable.

The ratings reflect the company's strong consolidated risk-adjusted capitalisation and its excellent business profile in the Finnish market. An offsetting factor is Tapiola's underwriting performance.

Strong consolidated risk-adjusted capitalisationCoTapiola's risk-adjusted capitalisation is excellent and has been built up through retained earnings and significant equalisation reserves, which A.M. Best regards as capital. A.M. Best regards Tapiola's overall risk profile as low due to its focus on personal lines of business. However, the long tail of claims reserves for motor third party liability and workers' compensation exposes the company to the risk of adverse reserve developments. The company also benefits from an adequate reinsurance programme placed with highly rated companies.

Excellent business position in the Finnish marketCoA.M. Best believes that Tapiola has an excellent position in the Finnish non-life market. The company is the third-largest general insurer with a market share of approximately 18% and is part of a group of mutual companies active in general insurance, life insurance, pension and financial services. Tapiola writes a book of business that includes mainly motor, property and workers' compensation insurance. A.M. Best expects Tapiola to increase gross premiums written by approximately 7% to EUR 630 million (USD 800 million) in 2006. The company is improving its market position due to an effective distribution network and its strong brand despite a relatively mature and concentrated Finnish non-life market.

Unprofitable underwritingCoTapiola's underwriting results continue to be negative, mainly driven by compulsory motor third party liability and workers' compensation where compensation is mainly in the form of annuities. However, the long tail of these claims (approximately 10 years) enables Tapiola to compensate underwriting losses through investment income. Technical results are also influenced by the unwinding of the discount for annuities and rebates to policyholders. A.M. Best expects a deterioration of the combined ratio by approximately 2% to 110% in 2006 due to non-recurring costs for investing in claims management and product development as premium rates remain stable. Notwithstanding this, A.M. Best expects Tapiola to achieve an overall after-tax profit of approximately EUR 40 million (USD 51 million) before equalization reserves, which translates into a return on premium of 6%. This is supported by strong investment returns, although Tapiola has been reliant upon realised capital gains over the last six years.

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.