A.M. Best Revises Outlook to Negative for Great Northwest Insurance Company.

OLDWICK, N.J. -- A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of B+ (Good) and issuer credit rating (ICR) of "bbb-" of Great Northwest Insurance Company (GNIC) (headquartered in St. Paul, MN).

A.M. Best also has affirmed the FSR of B (Fair) and ICR of "bb" of Hawaiian Insurance and Guaranty Company, Limited (HIG) (Honolulu, HI). The outlook for these ratings is stable.

The outlook revision and rating affirmations of GNIC are based on its operating performance over the last two years, which has seen a 35% decrease over year-end 2006's capital base. Consequently, GNIC's surplus will receive a $1 million infusion from its parent company, GNW Acquisition Corp (GNWAC) (Idaho).

GNIC's performance, which generated the capital losses, was due to an increase in severe weather frequency in GNIC's operating region over the last two years. Many of these events, while severe, created losses below GNIC's reinsurance attachment point and remained wholly the responsibility of the company. GNIC is challenged to stem the volatility within its book of business in the near term.

HIG's ratings are based on the challenges it faces as a single state writer in a catastrophe-prone area, most specifically those of competition, economic scarcity inherent in an island economy and regulatory change. Partially offsetting these negative factors are the company's experienced management team, unique operating/distribution strategies, competitiveness of the proposed underwriting expense structure, historical profitability of the acquired book of business, operational support from its sister affiliate and adequate capitalization. The rating outlook is based on HIG's recent operating performance.

Additionally, A.M. Best has affirmed the ICR of "b" of GNWAC. The outlook for this rating remains stable. GNWAC has a debt-to-capital ratio of 43.7%, which for a company at its rating level is well within acceptable boundaries. GNWAC has enough liquidity to manage day-to-day operations without asking for assistance from its subsidiaries.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.

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.