OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of B+ (Good) and issuer credit rating of "bbb-" of First Net Insurance Company (FN) (Guam).

The ratings reflect FN's management's commitment in maintaining its strong capital adequacy, consistent underwriting results and continued effort in strengthening its operating efficiency. The ratings also recognize the operating support from FN's affiliate, Moylan's Insurance Underwriters, Inc.

FN has recorded profitable operating results consistently over the past few years. Its five-year average combined ratio stood at 81.5%, as compared to the industry average of 95.8%. Although the company's net loss ratio experienced a slight deterioration, its high quality business book continues to be profitable.

As a result of an additional USD 0.5 million capital injection, FN has maintained a solid capital level in spite of the unfavorable investment result. Stable operating results have led to a persistent growth in surplus over the past five years. A.M. Best believes that the continuing accumulation of operating surplus in conjunction with a moderate premium growth will result in a further improvement in the company's risk-based capitalization, as measured by Best's Capital Adequacy Ratio, going forward.

Partially offsetting these factors is the company's relative high expense ratio and business geographic concentration with exposure to natural catastrophic events in Guam.

Due to the small book size and FN's dependence on reinsurance protection, the company has a rather high cost structure relative to the industry average. It has produced an average expense ratio of 43.3% over the past five years. Nonetheless, FN has improved its operating efficiency in recent years.


FN has a narrow spread of geographic risk with its business concentration on the island of Guam, where it is prone to potential catastrophic perils. Given its limited underwriting capacity and the potential severity of losses from catastrophic risk, FN depends heavily on reinsurance coverage. Nonetheless, the company has taken initiatives to measure and monitor its probable maximum loss exposure since 2008 by employing the Monte-Carlo simulation approach.

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

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

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.

A.M. Best Company

Analysts

Fiona Chan, +852-2827-3413

fiona.chan@ambest.com

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Terrence Wong, +852-2827-3403

terrence.wong@ambest.com

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Public Relations

Jim Peavy, +(1) 908 439 2200, ext. 5644

james.peavy@ambest.com

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Rachelle Morrow, +(1) 908 439 2200, ext. 5378

rachelle.morrow@ambest.com



Source: A.M. Best Company