A.M. Best Upgrades Ratings of Proformance Insurance Company.

OLDWICK, N.J. -- A.M. Best Co. has upgraded the financial strength rating to B+ (Very Good) from B (Fair) of The Proformance Insurance Company (Proformance). Concurrently, A.M. Best has upgraded the issuer credit ratings (ICR) to "bbb-"from "bb" of Proformance and to "bb-" from "b-" of its holding company, National Atlantic Holdings Corporation (National Atlantic) (both of Freehold, NJ) (NASDAQ: NAHC). 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 demonstrated by National Atlantic. This was demonstrated by a $43 million capital contribution to Proformance from National Atlantic in April 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 auto, homeowners and associated "umbrella" policies with Proformance. These transactions enabled Proformance to lower dependence on reinsurance and enhance its actuarial, underwriting and claims staff.

Additionally, the company has received modest private passenger automobile rate increases, 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 passed private passenger automobile legislation in recent years, which was 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 Proformance's strategic initiatives and the improved operating environment, its earnings have been on a gradually increasing trend in recent years.

Proformance's negative rating factors include above average underwriting leverage and historically adverse loss reserve development. In addition, unfavorable operating performance over the previous five-year period was reflective of significant underwriting losses, driven by poor personal automobile liability loss experience. Loss experience was unfavorably impacted earlier in the period by New Jersey's 15% mandatory rate rollback (AICRA) in 1999 on personal auto rates, mandatory assignments of UEZ personal auto business and significant reinsurance costs. The company was also adversely impacted by inadequate rates relating to price caps on its acquired books of business that were in place for a three-year period from the date of the transactions, which expired as of December 31, 2004. Additionally, Proformance maintains a significant business concentration as a predominantly New Jersey private passenger automobile writer, which exposes it to market uncertainties created by the political and regulatory environment.

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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.