Best’s News & Research Service - November 20, 2015 01:14 PM (EST)
A.M. Best Affirms Ratings of First Net Insurance Company
- November 20, 2015 01:14 PM (EST)
Hong Kong //BestWire// - 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 both ratings is stable.
The ratings reflect First Net’s favorable risk-adjusted capitalization and improving quality of its insurance book. The ratings also recognize the operating support from its affiliate, Moylan’s Insurance Underwriters, Inc. (MIU).
First Net maintains a solid risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and A.M. Best expects its capitalization level to remain satisfactory to support its current ratings in the near term. Furthermore, First Net continues to improve the quality of its insurance book through prudent risk selection and cautious claims management.
Partially offsetting these positive rating factors are First Net’s volatility in underwriting performance, relatively high expense ratio and competitive market conditions.
Due to a major liability claim from year 2009, the company’s underwriting performance deteriorated significantly in year 2014 resulting in an operating loss for the first time in the past ten years. Nevertheless, the company’s consulting actuary commented the claim was highly unusual. The underwriting performance has promptly recovered to a profitable level for the first three quarters of year 2015.
First Net’s expense ratio has remained relatively elevated mainly due to the high cost of reinsurance protection and acquisition expenses paid to MIU, which performs various operational functions for First Net. Guam’s general insurance industry remains competitive, which makes it difficult for First Net to seize additional market share in the near term.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.