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A.M. Best Affirms Ratings of Bison Insurance Company Limited CONTACTS:
FOR IMMEDIATE RELEASE OLDWICK, NEW JERSEY, U.S.A., Nov. 18, 2008—A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-" of Bison Insurance Company Limited (Bison) (Hamilton HM 11, Bermuda). The outlook for both ratings is stable. The ratings reflect Bison’s historically adequate capitalization, generally favorable operating performance, conservative reserve levels and effective management of its catastrophe exposures. The ratings also recognize Bison’s history of maintaining sufficient capital and financial resources to support its ongoing obligations. Partially offsetting these positive rating factors are the company’s volatile underwriting results due to the historically low loss frequency, high loss severity nature of its risk profile, coupled with its high limits and high net retentions relative to surplus. Additionally, the continually changing risk profile of Bison’s primary insured causes large profilechanges that effect the captive. This is mitigated somewhat with Bison’s conservative reserving philosophy and the ongoing, demonstrated support from its parent, Duke Energy Corporation (Duke Energy) [NYSE: DUK]. Bison is the single parent captive of Duke Energy and its subsidiaries. The risk management team of Duke Energy takes a holistic approach to managing the risks of the company, and utilizing Bison as an integral tool in this process. Bison continues to acquire additional lines of business from Duke Energy, thereby providing additional diversification of risks insured. Bison’s long-term growth opportunities primarily depend on the business success of Duke Energy. Long term, Bison will pursue additional lines of business, both from the parent and its subsidiaries. In 2007 the risk profile of Bison became more conservative, though somewhat narrower, due to the spin-off of Spectra Energy (Spectra) [NYSE:SE] according to management. Spectra encompasses all of Duke Energy’s natural gas and pipeline business, which produced the majority of large property and business interruption losses in the past. Bison’s exposure to Gulf of Mexico property losses is significantly diminished, and Bison does not provide business interruption coverage anymore, subsequent to the spin off, except for limited amounts of coverage in South America in order to comply with contractual obligations. A.M. Best remains the leading rating agency of captive insurers rating a wide variety of more than 200 captives in the United States and throughout the world. For current Best’s Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive. Founded
in 1899, A.M. Best Company is a global full-service credit rating organization
dedicated to serving the financial and health care service industries,
including insurance companies, banks, hospitals and health care system
providers. For more information, visit www.ambest.com.
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