A.M. Best Affirms Ratings of Connaught Insurance Company Limited

The ratings reflect Connaught's adequate level of risk-adjusted capitalisation in addition to an historically good operating performance. Offsetting factors include a potentially volatile underwriting performance and a restricted business profile.

A.M. Best anticipates that Connaught will maintain an adequate level of risk-adjusted capitalisation throughout 2009 and 2010. This is likely to be supported by a high level of absolute capital and surplus as well as fully retained earnings and a conservative investment strategy. Although Connaught does not itself have any reinsurance protection, its relatively high level of capital and surplus is sufficient to absorb a single large loss. Connaught's book of business has fluctuated significantly in recent years, and although A.M. Best considers current levels of capital adequate to absorb large losses, there is some concern over the captive's risk tolerance going forward.

Over recent years, Connaught's level of capitalisation has been supported by a consistently good operating performance, as evidenced by loss ratios of 21.9%, 0.5% and 6.9% in 2008, 2007 and 2006, respectively. A.M. Best considers that although performance is likely to remain good in 2009 and 2010, there is a degree of potential volatility within Connaught's business due to lack of diversification, exposure to large potential losses and lack of reinsurance coverage.

Although Connaught is likely to maintain a restricted business profile and manage only a small number of policies, A.M. Best believes the company is likely to remain an important insurance function for the TG&S group in coming years.

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that 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. For more information, visit www.ambest.com.

A.M. Best Co.
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