A.M. Best Affirms Ratings of First Net Insurance Company

Thursday September 4 11:47 PM

The ratings reflect First Net's persistent favorable operating results, adequate risk-based capitalization and solid local market knowledge. The ratings also recognize the distribution, claims management and administrative support from its affiliate, Moylan's Insurance Underwriters, Inc.

The company's overall operating results remained profitable in 2007, although its net loss ratio experienced a slight deterioration. First Net produced favorable underwriting results due to the continued initiative in strengthening its operating efficiency through a better underwriting process and information system. First Net produced a combined ratio of 81.7% over the past five years, which is superior to the industry average.

With more than 75.9% of First Net's assets allocated in cash and fixed income instruments, the company has consistently generated a stable investment yield. In view of the company's prudent investment strategy and the quality of its insurance book, its operating profitability is expected to remain sound in the near term.

Consistent growth in surplus along with moderate premium expansion has led to an improvement in net premium leverage measures and risk-based capitalization, as measured by Best's Capital Adequacy Ratio, in the past five years. Due to First Net's operating stability, it is expected that the company will maintain solid risk-adjusted capitalization to support the continual growth in its insurance book going forward.

Partially offsetting these factors is First Net's relatively high expense ratio, limited underwriting capacity and concentrated risk profile associated with its exposure to weather-related catastrophe events, and regulatory and economic factors in Guam.

As a result of its limited underwriting capacity, First Net heavily relies on its reinsurance programs to alleviate the impact of the frequency and severity of losses pertaining to both non-catastrophe and catastrophe exposures. Additionally, the company continues to produce an expense ratio higher than the industry average due to its small operation scale.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

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.

Contact:

A.M. Best Co.
Analysts
Terrence Wong, +852-2827-3403
terrence.wong@ambest.com
or
Billy Kwan, +852-2827-3405
billy.kwan@ambest.com
or
Public Relations
Jim Peavy, +(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

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