Ratings: First Capital, First Net, Trinidad & Tobago Ins., Harmony General

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Singapore’s First Capital Insurance Limited, both with stable outlooks. The ratings reflect First Capital’s “adequate risk-adjusted capitalization and its ability to post consistent positive earnings and to gain market share while operating in a competitive market environment,” said Best, adding that the Company’s “local capital adequacy ratio remains well above the minimum required in maintaining a strong risk-adjusted capitalization.” Best said it believes the company will be able to “conserve its strong capitalization in the near term. First Capital has a track record of favorable operating results over the past five years. The underwriting profitability since 2006 was mainly due to the significant amount of profit commission income derived from its reinsurers. As offsetting factors Best cited the “increasing trend in the overall incurred claims ratio, which can be ascribed mainly to the changing competition of the portfolio due to the growing motor business. Although the motor line has grown in the last couple of years, it still represents less than 13 percent of First Capital’s gross premium and less than 27 percent of the net retained premium.” Best will continue to monitor the situation.

A.M. Best Co. has upgraded the financial strength rating to ‘B++’ (Good) from ‘B+’ (Good) and issuer credit rating to “bbb” from “bbb-” of Guam-based First Net Insurance Company, and has revised the outlook for both ratings to stable from positive. These rating actions acknowledge First Net’s “management and ultimate parent’s continued commitment in strengthening the company’s risk-based capitalization,” Best explained. “In addition to operating support through distribution and backroom services, the parent company, Moylan’s Insurance Underwriters, Inc. (MIU), infused $ 500,000 into First Net in 2009 to support the company’s ongoing business growth.” Best added that the ratings also recognize First Net’s claims experience consistently outperforming the industry, reflecting the good quality of its book. Furthermore, slower premium growth relative to the surplus accumulation has further boosted First Net’s risk-based capitalization.” Best said it believes the company’s risk-based capitalization “will be maintained adequately to support its underwriting risks going forward.” As offsetting factors, best cited “the exposure to natural catastrophe perils, high reliance on reinsurance coverage and the high expense ratio. First Net has a narrow spread of geographic risk with its business concentration in Guam, where it is prone to potential catastrophic perils. Given its limited underwriting capacity and the potential severity of losses from catastrophic risk, the company depends heavily on its reinsurance coverage.” In addition Best pointed out that “First Net has a high cost structure relative to the industry average, mainly driven by the commission paid to MIU. The expense ratio slightly increased in 2009 due to costs from legal and auditing as well as the employees’ welfare.” Best added that it “anticipates that the company’s expense ratio will remain high in the near term.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Trinidad & Tobago Insurance Limited (TATIL), both with stable outlooks. The ratings reflect TATIL’s “historically profitable operating performance, adequate capitalization and support of its ultimate parent, ANSA McAL Limited (AMCL),” said Best. AMCL is one of the largest diversified companies in the Caribbean and is publicly-traded on the Trinidad & Tobago stock exchange.” Best added that “TATIL’s prudent underwriting philosophy and conservative risk management strategies have historically resulted in favorable underwriting results. This has enabled the company to continue to record stable and consistent earnings, while enhancing TATIL’s risk-adjusted capitalization. As an important strategic focus within AMCL’s financial services segment, TATIL has the support and commitment of AMCL, benefiting from group synergies along with access to AMCL’s considerable resources, including information technology, financial and investment management services.” As offsetting factors, best cited the geographic concentration of TATIL’s operations, the challenges to maintain market share in extremely competitive markets and the potential impact from exposure to weather-related events.”

A.M. Best Co. has assigned a financial strength rating of ‘B+’ (Good) and issuer credit rating of “bbb-” to Barbados-based Harmony General Insurance Company Ltd., both with stable outlooks. The ratings reflect Harmony’s “solid risk-adjusted capitalization, consistent overall earnings in recent years and its conservative reinsurance program,” Best explained. Harmony is owned by ABH Holdings Inc., a privately owned, Barbados-domiciled holding company. Harmony has “reported consistent overall earnings in recent years and the company continues to enhance capitalization through retention of earnings,” Best continued. This has enabled Harmony to “maintain more than adequate risk-adjusted capitalization for its current business profile. Although the company operates in a region that has historically been less prone to hurricane activity, Harmony maintains a very conservative reinsurance program to limit its exposure to catastrophic events.” As offsetting factors, Best cited “the geographic concentration of Harmony’s business in an increasingly competitive domestic market, the company’s reliance on reinsurance as a catastrophe risk mitigation strategy and Harmony’s limited financial flexibility as a result of the its private ownership structure.”