S&P Assigns North Pointe Insurance and Sub `Bpi' FSR.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire

Jan. 16, 2001--Standard & Poor's today assigned its single-'Bpi' financial strength rating to North Pointe Insurance Co. (North Pointe) and its reinsured, wholly owned subsidiary, North Pointe Insurance Co. of Illinois (NAIC: 10388).

Key rating factors include debt leverage at the parent holding company, limited operating scope, elevated operating leverage, and geographic concentration. Partially offsetting these negative factors is the company's strong operating performance.

Based in Southfield, Mich., North Pointe (NAIC: 27740) writes mainly private passenger auto insurance and general liability insurance on an occurrence basis. About 97% of the company's business lies within its major states of operations--Michigan and Iowa--and its products are distributed primarily through independent general agents.

North Pointe, which began business in 1987, is licensed in 12 states and is a member of North Pointe Group. All 50,000 outstanding common shares (50,000 authorized) are owned by North Pointe Financial Services Inc., with ultimate ownership residing with Queensway Financial Holdings, Ltd. (Queensway) of Toronto, Canada. Queensway is a specialty insurance group operating through a number of subsidiaries in the U.S. and Canada, providing a range of individual and commercial insurance coverages. It is publicly traded on the Toronto Stock Exchange under the symbol QFH.

Major Rating Factors::

-- The rating is constrained to single-'Bpi' as a consequence of Queensway's
December 2000 default on debt payments. The parent holding company has been in
the process of divesting itself of some of its subsidiaries (Atlantic Alliance
Fidelity & Surety Co.) and selling blocks of business (International Indemnity
Co.'s nonstandard auto business) to reduce its debt load.

-- The company's business scope is limited. Surplus was $16.4 million at
year-end 1999. The gain in surplus of $400,000 from 1998 was composed mainly of
$1.2 million in net income offset by a negative $400,000 change in the
company's excess statutory reserves, $300,000 in dividends to stockholders, and
a net unrealized capital loss of $100,000.

-- At year-end 1999, capitalization was more than adequate, as indicated by a
Standard & Poor's capital adequacy ratio of 131.5%. However, in 1999, the
company was more leveraged than its peers, with net premiums written plus
liabilities to surplus of more than 5.5 times. Further, the NAIC risk-based
capital ratio is below the industry median at 139.1%.

-- The company's geographic and product line concentrations are high with
respect to current capitalization. At year-end 1999, 91.6% of direct premiums
were in Michigan.

-- Operating performance has been strong, with a five-year average ROR of
10.3%. The drop in net income of $1.0 million in 1999 compared with the prior
year was caused primarily by a decline of $1.7 million in net underwriting
income, offset by an increase of $700,000 in the company's Federal Income Tax
provision.

Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.

Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. - CreditWire.