(Business Wire) – A.M. Best Co. has placed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Associated Electric & Gas Insurance Services Limited (AEGIS) (Hamilton, Bermuda) under review with negative implications. These rating actions are due in part to the unexpected 30.0% decline in surplus as of December 31, 2008, compared to year-end December 31, 2007.
The rating actions follow AEGIS’ disappointing net loss for 2008 that included significant investment losses, which produced a $323.4 million erosion in policyholders’ surplus in 2008. A.M. Best also is concerned that the continuing turmoil in the financial markets could further erode AEGIS’ capital position and negatively impact its earnings in 2009. Furthermore, A.M. Best assigned a negative outlook to AEGIS’ ratings on December 5, 2006 due to concerns that its risk-adjusted capitalization—as measured by Best’s Capital Adequacy Ratio (BCAR)—had declined over the previous three-year period due largely to loss reserve growth outpacing policyholders’ surplus.

The ratings will remain under review pending A.M. Best’s imminent review and further discussions with management, and the company’s actuaries relating to the potential purchase of a loss reserve adverse development reinsurance cover for AEGIS’ workers’ compensation, excess casualty, pollution and Directors & Officers portfolios in force at December 31, 2008.

After this initiative has been completely analyzed, A.M. Best will re-evaluate AEGIS’ ratings to determine whether it has a sufficient capital cushion to weather any additional negative effects from the continuing turmoil in the financial markets as well as underwriting risks and any other unexpected events.

A.M. Best remains the leading rating agency of captive insurers rating a wide variety of more than 200 captives in the United States and throughout the world.

For current Best’s Credit Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive.

The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.

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.