Europe and reinsurance lead as A.M. Best Stock Indexes show a double-digit gain for 2006.

Europe and Reinsurance stock indexes led the way as A.M. Best's Co.'s composite index of global insurance-related stocks finished out the year with double-digit gains.

The 185 insurance, reinsurance and broker stocks comprising the A.M. Best Global Insurance Composite Index rose 13.80% from the previous year, as the A.M. Best European Insurance index rose 29.52%, the U.S. index rose 7.62%, and the Asia Pacific index rose 7.52%.

European insurance stocks benefited from a weakening U.S. dollar versus the euro and British pound. Over 2006, the dollar has decreased in value against the pound by 15%, while the euro has risen 12% against the dollar since December 2005. Meanwhile, unemployment in Germany dipped to less than 4 million in November, the first time it has done so since 2002. Overall, the European economy remained robust through 2006, with the European Central Bank raising interest rates five times over the past year.

The European stocks may have also benefited from better financial results for Europe-based reinsurers, who saw profits rise when the expected very active Atlantic hurricane season fizzled out thanks to the El Nino effect and other factors.

Meanwhile, the A.M. Best U.S. Insurance Index, which of the 15 stock indexes A.M. Best Co. introduced this year has the most weight in the AMB Global index, saw its property/casualty-specific stock index rise 14.24%, offsetting a 2.17% decline in the broker stock index. Property/casualty insurers likewise enjoyed a quiet hurricane season, allowing for better profits, fewer losses and the ability to rebuild reserves. Many P/C insurers also took exposure-limiting actions in 2006, decreasing the chances of future losses as well. The U.S. sector-specific indexes are heavily correlated with the global market lines.

Among A.M. Best's sector-specific stock indexes, the Global Reinsurance index had the highest gain for the year, finishing out 2006 up 22.65%. Again, the lack of catastrophes allowed reinsurers to rebuild after 2005's hurricane season and allowed for well-performing companies to increase profits. The worst performer was the Global Brokers index, which fell 1.53%.

The top five gainers among individual stocks for 2006 were China Insurance Holdings Co. Ltd., up 196.97%; DBV Winterthur Holding AG, up 132.29%; EMC Insurance Group Inc., up 71.11%; Meadowbrook Insurance Group Inc., up 69.35%; and Pacific Century Insurance Holdings Ltd., up 66.35%.

The five stocks losing the most value in 2006 were Scottish Re Group Ltd., down 78.25%; LIG Insurance Co. Ltd., down 28.54%; Penn Treaty American Corp., down 23.41%; Hyundai Marine & Fire Insurance Co. Ltd., down 19.18%; and Progressive Corp., down 17.04%.

Each of A.M. Best Co.'s 14 insurance stock indexes, plus the global composite index, is based on the aggregation of the prices of the individual publicly traded stocks, converted to U.S. dollars, and weighted for their respective free float market capitalizations. Each stock is assigned to subsidiary indexes based on the location of the exchange on which it primarily trades, and by the company's primary business. Primary business is determined by latest year-end net premiums written. Stocks assigned to the multiline indexes have 11% or more of annual net premiums written generated by insurance segments other than their primary insurance business.

Weightings of underlying stocks in each segment are adjusted as needed for occasional additions and deletions due to market entry or market departure, stock issuance or repurchases, stock splits, mergers or acquisitions, and changes in status of a company's interactive Best's Rating. The value of each segment is indexed to Dec. 31, 2004 = 1,000.00. The indexes are calculated by Dow Jones Indexes using the methodology detailed at the following link: http://www.djindexes.com/mdsidx/downloads/DJGI_Rulebook.pdf.

2006 Performance
A.M. Best's Stock Indexes

(Dec. 31, 2004 = 1,000.00)

                                             Index Close   Year (%)
AMB vs DOW
  AMB's Insurance Composite (AMBG)              1,330.50      13.80
  Dow Jones Industrial Avg (DJIA)              12,463.15      16.29
Global and Regional Indexes (Ticker)
Insurance Composite Indexes by Region
  United States (AMBUS)                         1,259.23       7.62
  NYSE                                          9,139.02      17.86
  Europe (AMBEUR)                               1,476.71      29.52
  FTSE 100                                      6,220.80      10.71
  Asia/Pacific (AMBAP)                          1,396.01       7.52
  NIKKEI 225                                   17,225.83       6.92
Insurance Indexes by Market Type (Global)
  Non-Life (AMBGNL)                             1,285.76      13.72
  Life (AMBGL)                                  1,381.54      11.02
  Multi-Line (AMBGML)                           1,335.38      19.48
  Reinsurance (AMBGR)                           1,339.13      22.65
  Brokers (AMBGB)                               1,078.12      -1.53
U.S. Indexes (Ticker)
Insurance Indexes by Market Type (U.S.)
  Multi-Line (AMBUML)                           1,162.59       8.70
  Property/Casualty (AMBUPC)                    1,244.28      14.24
  Life & Health/HMO (AMBULH)                    1,362.11       3.54
  Life (AMBUL)                                  1,401.47      14.66
  Health/HMO (AMBUH)                            1,318.23      -6.06
  Brokers (AMBUB)                               1,061.93      -2.17

Source: A.M. Best, Dow Jones Indexes