[December 20, 2012]

A.M. Best Affirms Ratings of Echelon General Insurance Company and EGI Financial Holdings Inc.

A.M. Best Co. has affirmed the financial strength rating of B++ (Good) and issuer credit rating (ICR) of "bbb+" of Echelon General Insurance Company (Echelon). Concurrently, A.M. Best has affirmed the ICR of "bb+" of Echelon's publicly traded parent, EGI Financial Holdings Inc. (EFH). The outlook for all ratings is stable. Both companies are domiciled in Mississauga, Ontario.

The ratings and outlook for Echelon are based upon the company's good risk-adjusted capitalization, historically profitable earnings as a result of strong net investment income and low exposure to catastrophic loss. As primarily a non-standard auto insurer, the company has minimal property loss exposure due to a catastrophic event of any appreciable size. The ratings also consider that the parent holding company is publicly traded on the Toronto Stock Exchange, affording potential greater financial flexibility to raise equity during favorable markets.

These positive rating factors are partially offset by Echelon's varied underwriting results in recent years, concentration in the Ontario non-standard auto market, strong competitive market pressures and soft market pricing conditions in other lines of business.

The rtings of EFH are based primarily on the overall financial strength of its operating insurance company, Echelon. In addition to Echelon, EFH is the parent of CIM Reinsurance Company Ltd, a Barbados captive reinsurer, CUISA Managing General Agency Corporation, a British Columbia specialty insurance agency, American Colonial Insurance Company and Qudos Insurance A/S, vehicles for growing business in the non-standard auto market in the United States and program niche business in Europe, respectively. A.M. Best will closely monitor the growth of these unrated entities and progress of these companies and their potential impact on the overall financial strength of the organization.

The ratings and outlook of EFH and/or Echelon could benefit from a consistently favorable earnings trend that outperforms peers in the long term, while maintaining strong risk-adjusted capitalization.

However, the ratings and outlook of EFH and/or Echelon may come under negative pressure if an unfavorable earnings trend develops, underwriting and financial leverage increases significantly, and/or risk adjusted capital erodes.

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 Canadian Property/Casualty Insurers"; and "Rating Members of Insurance Groups." Best's Credit Rating 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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