A.M. Best Upgrades Issuer Credit Rating of First Net Insurance Company

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HONG KONG--(BUSINESS WIRE)-- A.M. Best Co. has upgraded the issuer credit rating (ICR) to “bbb+” from “bbb” and affirmed the financial strength rating of B++ (Good) of First Net Insurance Company (First Net) (Guam). The outlook for both ratings is stable.

The ICR upgrade reflects the commitment of the management to reduce the catastrophe exposure of First Net and enhance the company’s enterprise risk management framework and practice. The ratings also recognize First Net’s prudent underwriting practice and support from its shareholders.

First Net’s recorded claims experience has consistently outperformed its industry peers, reflecting the good quality of its book and its prudence in selecting and pricing risks. Its underwriting leverage has been trending downward over the past five years due to the commitment of First Net’s shareholders to continuously strengthen the capital base through capital injections without any dividend payouts.

First Net has a narrow spread of geographic risk with its business concentration in Guam, where it is prone to potential catastrophic perils. The company is thus exposed to potentially severe losses from catastrophic risk. To protect its capital base against sizable losses, First Net has tightened its underwriting guideline regarding policies with earthquake exposure and has increased its reinsurance catastrophe limit in 2011. A.M. Best expects that First Net’s risk-based capitalization will be in an upward trend stemming from the management’s initiatives to control the catastrophe exposure, in addition to consistent and favorable generation and retention of earnings.

Partially offsetting these factors are the exposure to potential natural catastrophe perils and a high expense ratio.

First Net historically has a high cost structure relative to the industry average, mainly driven by the commission paid to Moylan’s Insurance Underwriters, Inc.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Understanding BCAR for Property/Casualty Insurers”; “Catastrophe Analysis in A.M. Best Ratings”; “Assessing Country Risk”; and “Risk Management and the Rating Process for Insurance Companies.” Methodologies 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 © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Co.Arina TekFinancial Analyst+852-2827-3424[email protected]orMoungmo LeeGeneral Manager+852-2827-3402[email protected]orChris SharkeyBusiness Analyst+(1) 908 439 2200, ext. 5159[email protected]orJim PeavyAssistant Vice President, Public Relations+(1) 908 439 2200, ext. 5644[email protected]

Source: A.M. Best Co.

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