A.M. Best Affirms Rating of Century Insurance Company, Ltd.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of B+ (Very Good) and assigned an issuer credit rating (ICR) of "bbb-" to Century Insurance Company, Ltd. (CIC) (Saipan). The outlook for both ratings is stable.

The ratings reflect CIC's improving capitalization, expected stable capital growth and consistent underwriting performance.

CIC's capitalization has improved in 2005. The Best's Capital Adequacy Ratio (BCAR), which measures capitalization on a risk-adjusted basis, indicates that the capital position of CIC has significantly improved due to a 16% growth of capital and surplus in 2005. A.M. Best expects the improving trend will continue as the company has forecast stable capital growth and only a moderate increase in premium income in next three years.

CIC's business generated from Guam has significantly increased after the company entered an agency agreement with Aon in 2004. The premium income generated from Guam increased to USD 12 million in 2005 from less than USD 1 million in 2003. The Guam portfolio contributed more than 50% of the company's underwriting income in 2005. The Guam portfolio has become CIC's major source of income. CIC's capitalization level will further strengthen should the Guam portfolio continue to contribute a stable underwriting income in the future.

CIC has not declared any dividends to its shareholders since beginning operations. The entire net income has been retained within the company to strengthen its financial condition. No dividend obligation to its shareholders also demonstrates the support of the parent company to expand CIC's underwriting capacity. According to the forecast provided by the company, CIC's capital and surplus will consistently grow reflecting the retention of its entire net income in the coming three years.

CIC has maintained a stable underwriting performance over the past five years. The five year average combined ratio was 83% for the period from 2001 to 2005. Although the expense ratio has significantly increased to 53% in 2005 from 23% in 2004, A.M. Best expects the expense ratio will decrease in 2006 given that a large portion of acquisition expense has been realized.

Offsetting factors include the high catastrophe exposures associated with the Commonwealth of the Northern Mariana (CNMI) and Guam, and low investment returns.

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

CIC's net investment yield has been lower than 2% for the past three years. The company invested a majority of its assets in cash and fixed income securities, and has had a target maximum equity limit of 15% of invested assets in the past. The company has reviewed its investment strategy and has increased its equity limit to 30% in 2005. Going forward, it could be a challenge for the company to manage the higher investment risk.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.