Best Affirms Century (Marianas) Ratings

May 7, 2007

A.M. Best Co. has affirmed the financial strength rating of “B+” (Good) and the issuer credit rating of “bbb-” of Century Insurance Company Limited (CIC), which operates in the Northern Mariana Islands. The outlook for both ratings is stable.

The ratings reflect CIC’s adequate risk-adjusted capitalization, stable underwriting performance and well-established presence in the marketplace.

Best’s Capital Adequacy Ratio (BCAR), which measures capitalization on a risk-adjusted basis, indicates that CIC’s capital position remains stable. As at year-end 2006, the company’s capital and surplus increased by 20.2 percent compared to year-end 2005, which is partly attributed to the capital injection provided by its parent.

CIC has maintained stable underwriting performance over the past five years. Its five-year average combined ratio was 85.2 percent for the period from 2002 to 2006. In 2006, the company recorded a net income of approximately USD 1.1 million with a return on equity of 10.5 percent.

CIC has a well-established presence in both the Commonwealth of the Northern Mariana Islands (CNMI) and Guam. As of 2006, CIC was the largest general insurer in the CNMI with market share of approximately 33 percent and was the sixth-largest insurer in Guam with market share of approximately 9 percent.

As “offsetting factors,” Best cited “high catastrophe exposure in the CNMI and Guam, heavy reliance on a single distribution channel and credit risk associated with its insurance receivables.”

CIC is exposed to catastrophic perils in the CNMI and Guam even though it is reasonably protected under current reinsurance programs. CIC’s profitability could be challenged if more frequent and destructive catastrophic events occur.

In 2006, 84 percent of the company’s gross premium written was sourced through a major distribution channel. As such, the concentration risk in terms of the distribution channel is considered high.

Further, CIC’s insurance receivables as at year-end 2006 accounted for over 40 percent of the company’s total assets. Any material adverse credit development in connection with the insurance receivables will put a strain on the company’s financial strength

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