[November 15, 2012]

A.M. Best Affirms Ratings of Harmony General Insurance Company Ltd.

A.M. Best Co. has affirmed the financial strength rating of B+ (Good) and issuer credit rating of "bbb-" of Harmony General Insurance Company Ltd. (Harmony) (Barbados). The outlook for both ratings is stable.

The ratings reflect Harmony's solid risk-adjusted capitalization, overall earnings in recent years and conservative reinsurance program. Harmony is owned by ABH Holdings Ltd., a privately owned, Barbados-domiciled holding company.

Harmony has reported overall earnings in recent years, which has enabled it to enhance its capitalization through retention of earnings. Harmony continues to maintain solid risk-adjusted capitalization for its current business profile. Although the company operates in a region that has historically been less prone to catastrophic events, Harmony maintains a very conservative reinsurance program to limit its exposure to natural disasters.

Partially offsetting these positive rating factors is the geographic concentration of Harmony's business in an increasingly competitive domestic market, its reliance on reinsurance as a catastrophe risk mitigation strategy and its limited financial flexibility as a result of its private ownership structure.

While the outlook is stable, factors that could contribute to rating enhancement include consistent improvement in Harmony's underwriting performance, overall profitability and an upgrade in the Barbados country risk tier rating.

Factors that may lead to negative rating actions include a sustained decline in the company's underwriting profitability, significant deterioration in its risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR) and a downgrade in the Barbados country risk tier rating.

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 utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Understanding Universal BCAR"; "Catastrophe Analysis in A.M. Best Ratings"; and "Assessing Country Risk." Best's Credit Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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