2009-11-19 18:16:06 -

A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of “a-” of Flagstone Reinsurance Africa Limited (Flagstone Re Africa) (South Africa). The outlook on both ratings is stable.

The ratings reflect the company’s strong risk-adjusted capitalisation as well as the explicit support provided by its parent, Flagstone Reassurance Suisse SA (Flagstone Suisse). Offsetting factors include the execution risks associated with the company’s business plan given the rapid growth, the competitive South African reinsurance market and Flagstone Re Africa’s small business profile in this market.

Support provided by Flagstone Suisse is fundamental to the ratings assigned to Flagstone Re Africa. The support comes in the form of an extensive reinsurance programme, including a 75%

quota share agreement on all lines of business, along with a contractual agreement guaranteeing all liabilities of the Flagstone Re Africa subsidiary.

Additional global resources available from the Flagstone Suisse group include executive and non-executive support, underwriting guidelines, marketing, modelling and operating systems.

In June 2008, Flagstone Re Africa’s capital position was strengthened by a capital injection of approximately RAND 70 million (USD 8.9 million) from Flagstone Suisse (as part of the acquisition of the 65% shareholding), and A.M. Best believes that the strong risk-adjusted capital position is likely to be maintained in the next three to five years, partly due to the low retention.

In September 2009, Flagstone Suisse decided to exercise its option to acquire the remaining 35% of Flagstone Re Africa—earlier than had been originally anticipated. A.M. Best views this move as a positive reinforcement of Flagstone Suisse’s commitment to its Africa subsidiary.

A.M. Best considers Flagstone Re Africa’s current business profile to be limited due to its relatively small premium volumes and market share.

However, despite the competitive market, A.M. Best believes the company’s growth targets of 10% above inflation in both 2009 and 2010 are achievable. The company’s gross premiums grew by 63% to RAND 159 million between 2006 and 2008, with the bulk of the growth in 2008.

A.M. Best expects Flagstone Re Africa’s underwriting performance to improve in the short to medium term as the growing book of business leads to claims stability, and fixed expenses are spread over a larger base. In 2008, the company posted a breakeven pre-tax profit, as underwriting losses were largely offset by positive investment returns.

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.Analysts:Pedzi Chindotana,

+(44) 20-7626-6264 pedzi.chindotana@ambest.com : mailto:pedzi.chindotana@ambest.com orCarlos
Wong-Fupuy, +(44) 20-7626-6264 carlos.wong-fupuy@ambest.com : mailto:carlos.wong-fupuy@ambest.com orPublic
Relations:Jim Peavy, +(1) 908-439-2200, ext. 5644 james.peavy@ambest.com : mailto:james.peavy@ambest.com orRachelle
Morrow, +(1) 908 439 2200, ext. 5378 rachelle.morrow@ambest.com : mailto:rachelle.morrow@ambest.com