AM Best


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


CONTACTS:


Angela Chow
Associate Financial Analyst
+852-2827-3407
angela.chow@ambest.com

Jeff Yeung
Associate Director, Analytics
+852-2827-3413
jeff.yeung@ambest.com

Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

HONG KONG - NOVEMBER 20, 2014 12:14 PM (EST)
A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of "bbb+" of First Net Insurance Company (First Net) (Guam). The outlook for First Net's ratings is stable.

The rating affirmation is a reflection of First Net's solid risk-adjusted capitalization, prudent catastrophe risk management and the improving quality of its insurance book. The ratings also recognize the operating support from its affiliate, Moylan's Insurance Underwriters, Inc. (MIU).

In the past five years, First Net has committed to improving the quality of its insurance book through tightening underwriting policy, more prudent risk selection and cautious claims management. To further manage fire exposure from Guam's outer islands, the company has been pro-active in risk management, adopted a new rating scale and is re-underwriting its book of business. Having seen catastrophe exposures increase with the growth of the insurance book, First Net has increased its catastrophe reinsurance coverage in recent years. In addition, MIU's affiliation as a managing general agent provides First Net with a stable source of business.

Partially offsetting these positive rating factors are First Net's relatively high expense ratio and competitive market conditions.

First Net's expense ratio has remained relatively elevated mainly due to the high cost for reinsurance protection and acquisition expenses paid to MIU, which performs various operational functions for First Net.

Guam's general insurance industry also continues to be very competitive, making it difficult for First Net to seize additional market share in the near term.

Another offsetting factor is First Net's small underwriting insurance book, which may subject to higher volatility from large risks or large-event losses.

Future positive rating actions could occur if First Net shows continuous improvement in underwriting performance while maintaining its solid risk-based capitalization. Negative rating actions could occur if First Net's operating performance deteriorates, resulting in substantial decline in its risk-based capitalization level.

The methodology used in determining these interactive 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.

Key insurance criteria reports utilized:


  • Catastrophe Analysis in A.M. Best Ratings

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for Property/Casualty Insurers


Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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