A.M. Best Upgrades Ratings of Proformance Insurance Company

A.M. Best Co. has upgraded the financial strength rating to B++ (Good) from B+ (Good) and the issuer credit ratings (ICR) to "bbb" from "bbb-"of Proformance Insurance Company (Proformance). Concurrently, A.M. Best has upgraded the ICR to "bb" from "bb-" of Proformance's holding company, National Atlantic Holdings Corporation (National Atlantic) (both of Freehold, NJ) (NASDAQ: NAHC - News). All ratings have a stable outlook.  
  
Proformance's positive rating attributes include increased surplus and reduced underwriting leverage over the previous five-year period, as well as the financial flexibility of its parent, National Atlantic. This financial flexibility was demonstrated by its capital contributions to Proformance of $9 million in 2006 and $43 million in 2005, as a result of an initial public offering. The company also received contributed capital from the Ohio Casualty of New Jersey, MetLife Auto & Home and Sentry Insurance transactions, in conjunction with the renewal of New Jersey private passenger automobile, homeowners and associated "umbrella" policies by Proformance. These transactions enabled Proformance to lower its dependence on reinsurance and enhance its actuarial, underwriting and claims staff.  
  
Additionally, the company has implemented modest private passenger automobile rate changes, reduced assigned Urban Enterprise Zone (UEZ) business through increased voluntary writings, which have lower loss ratios, and adjusted its tier rating plan and territorial relativities. Furthermore, New Jersey has passed private passenger automobile legislation in recent years, designed to increase market capacity and promote competition in the state, as well as reduce fraud and lower the number of uninsured motorists. As a result of the company's strategic initiatives and the improved operating environment, its earnings have trended upwards in recent years.  
  
Proformance's negative rating attributes include unfavorable operating performance earlier in the previous five-year period that was reflective of significant underwriting losses due to poor personal automobile liability loss experience. Loss experience was unfavorably impacted earlier in the period as a result of certain policies written in connection with the aforementioned replacement carrier transactions.  
  
Furthermore, the company has reported historically adverse loss reserve development, although recent development trends appear to be more favorable.  
  
Finally, Proformance maintains a significant business concentration as a New Jersey writer, which exposes it to market dislocations, legislative and judicial changes and catastrophe events.  
  
For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.  
  
Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.