EGI Financial Holdings Inc. : 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). The outlook for both ratings is stable. Concurrently, A.M. Best has affirmed the ICR of "bb+" of Echelon's publicly traded parent, EGI Financial Holdings Inc. (EFH) [TSX: EFH]. The outlook for EFH's ICR has been revised to negative from stable. Both companies are domiciled in Mississauga, Ontario.

The ratings and outlook for Echelon are based upon the company's historically profitable operating results, good risk-adjusted capitalization 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.

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

The ratings 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, and Qudos Insurance A/S, a vehicle for growing non-standard auto and program business primarily in the United Kingdom and Denmark. The revised outlook for EFH's ICR reflects the potential challenges EFH may face given the substantial projected net premium written growth of these entities and their potential impact on the overall financial strength of the organization. A.M. Best will continue to closely monitor the progress of these companies.

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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

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A.M. Best Co.
Jacqalene Lentz, 908-439-2200, ext. 5762
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Rachelle Morrow, 908-439-2200, ext. 5378
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Jim Peavy, 908-439-2200, ext. 5644
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