Decrease in finite puts Imagine back on stable

AM Best has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Imagine Insurance Company. The outlook for both ratings has been revised to stable from negative.

Imagine's capital base was strengthened in December 2006 through the private placement of a 10-year $110m subordinated floating rate note with an affiliate of majority shareholder, Brookfield Asset Management. The contribution increases the company's risk-based capital score to an appropriate level for Imagine's business profile; however, total capitalisation remains somewhat low relative to larger competitors in Imagine's targeted markets.

Imagine's business profile includes writing insurance and reinsurance on both a traditional and nontraditional basis. Following the acquisition in December 2004 of Danish Re, including Lloyd's Syndicate 1400 and the acquisition in late 2005 of Abacus Syndicates Limited, which includes Lloyd's Syndicates 2525 and 2526, Imagine's management team increased the overall percentage contribution of traditional property/casualty insurance and reinsurance to its book of business written in 2006 while the impact of non-traditional and historic finite risk contracts declined. As a result, the percentage contribution of these contracts to net income has also declined over the same period.

Imagine's revised outlook is based on declining level of historic finite risk in Imagine's book of business and a subsequent reduction in operational risk attributable to these contracts. The future viability of finite products remains somewhat uncertain until governmental scrutiny is complete and any new requirements regarding finite products are established.