A.M. Best Affirms Ratings of National American Insurance Company (OK) and Chandler (USA) Inc.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of B+ (Good) and issuer credit rating (ICR) of "bbb-" of National American Insurance Company (OK) (NAICO) (Chandler, OK). Concurrently, A.M. Best has affirmed the ICR of "bb-" and debt rating of "bb-" on $24 million 8.75% senior unsecured debentures, due 2014 of NAICO's parent, Chandler (USA) Inc. (Chandler) (Chandler, OK). The outlook for all ratings is stable.

The ratings reflect NAICO's solid risk-adjusted capitalization and improved operating performance, primarily driven by the reduction of the extent of unfavorable loss reserve development reported in recent years. This improvement is due in part to management's corrective actions over the years, including significantly increasing rates, reducing exposures, improving risk selection and tightening policy terms and conditions.

These rating factors are offset by the continued variability of earnings and the magnitude of adverse loss reserve development reported on certain prior accident years as well as NAICO's considerable dependence on reinsurance, despite increased retention levels in recent years. Although certain recent accident years have developed adversely, they have done so to a much lesser extent.

The ratings also consider the financial leverage and interest coverage of the organization on an enterprise basis. While financial leverage remains acceptable given the current ratings, interest coverage fell below that expected for the given ratings in 2007 due to a decline in earnings as a result of the partial reversal of a prejudgment interest income accrual made in 2006. Although NAICO historically played a significant role in the servicing of holding company debt, other companies throughout the enterprise have met these obligations in more recent years. NAICO did, however, dividend $1.6 million to Chandler during 2007 to assist in the repurchase of preferred shares and cover other fixed charges. Similarly, it is possible that dividends from NAICO could be necessary to service the holding company's debt obligations in the future, which could have an adverse impact on surplus and overall capitalization.

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 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.