2013-03-01 17:52:21 -

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of GBG Insurance Limited (GBG) (Guernsey). The outlook for the ratings remains stable.

The ratings of GBG reflect its good level of prospective risk-adjusted capitalisation, its good anticipated financial performance and modest business profile. Offsetting these ratings is the high level of debt within GBG’s ultimate parent, Saxton Lane Company Limited (Saxton Lane).

GBG’s risk-adjusted capitalisation stabilised at an adequate level in 2012 as the capital and surplus increase by USD 4.2 million (through the increase in retained earnings of an equal amount) was largely offset by the higher levels of net premiums and reserves. Capitalisation is expected to strengthen

over the medium term through the retention of earnings, while both the insurance and investment risks are expected to remain low prospectively. However, a net premium income growth significantly in excess of the company’s business plans, a lower than expected profitability or an increase in risk profile are all likely to add pressure to GBG's level of risk-adjusted capitalisation. GBG’s financial leverage is currently comfortably within the limits for its ratings.

Overall results significantly improved last year following GBG’s below expectation performance in 2011. A good level of profitability is expected over the medium term given the actions the company has taken to improve the quality of its technical account since 2011. Technical results are expected to continue to be driven by commission and fee income, as GBG retains only a low amount of insurance risk.

As a specialized health insurer operating within the relatively fragmented international expatriate health and life insurance market, GBG remains small compared to larger multi-lines competitors. However, the company has been expanding both its insurance business portfolio and customer base, and premium income is expected to double in the next five years. GBG, which historically insured employees of international schools, is increasing its share of corporate business by successfully targeting small to mid-sized companies worldwide.

Saxton Lane remains highly leveraged. At June 30, 2012, it held senior debt of USD 7.7 million on shareholders' funds of around USD 8.7 million and goodwill of USD 3.8 million. Saxton Lane's level of leverage is expected to improve going forward as the group generates and retains profit and potentially reduces its debt as well.

Over time, a strengthening of GBG’s business profile along with sound underwriting results, a continued strong level of risk-adjusted capitalisation and a deleveraging at Saxton Lane are likely to have a positive impact on its current rating level.

Failure to generate and retain profit, a significant deterioration of risk-adjusted capitalisation or an increase of the leverage at the holding company or GBG could put negative pressures on the current ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.

Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include.

“Understanding Universal BCAR”; “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life/Health Insurers”; “Rating Members of Insurance Groups”; and “Catastrophe Analysis in A.M.

Best Ratings”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. .


In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M.

Best Europe - Rating Services Limited Supplementary Disclosure : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. .


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A.M. BestCharlotte Vigier, +(44) 20 7626 0270Senior

Financial Analyst charlotte.vigier@ambest.com : mailto:charlotte.vigier@ambest.com orRachelle

Morrow, +(1) 908 439 2200, ext. 5378Senior Manager, Public

Relations rachelle.morrow@ambest.com : mailto:rachelle.morrow@ambest.com orAnandi

Nangy-Kotecha, +(44) 20 7626 271Associate Director anandi.nangy-kotechan@ambest.com : mailto:anandi.nangy-kotechan@ambest.com orJim
Peavy, +(1) 908 439 2200, ext. 644Assistant Vice President,

Public Relations james.peavy@ambest.com : mailto:james.peavy@ambest.com