Best Affirms Bahamas First General ‘A-‘ Rating; Removes from Under Review Status

December 2, 2004

A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) of Bahamas First General Insurance Company Limited (BFG); has removed the rating from under review, and has assigned it a stable outlook.

“The rating reflects BFG’s solid capitalization, historically profitable operating results, conservative risk management strategies and its leading market presence in the Bahamas,” Best said. “In addition, the rating reflects anticipated capital strengthening following losses incurred from third quarter 2004 hurricane activity. These positive factors derive from BFG’s sound use of reinsurance coupled with its long-term profitability and a solid capital foundation. In 2004, BFG enhanced its business position in the local market with the acquisition of the Colina Financial Group’s general insurance business portfolio.”

BFG is expected to further increase its capital by $5 million prior to year-end 2004, subject to regulatory approval, through the issuance of preferred shares to support growth initiatives and to enhance its capital position. Furthermore, BFG continues to benefit from the sustainable competitive advantages derived from the ownership of key island agents and strategic agency relationships that have allowed it to establish name recognition and market share.

Best noted that “BFG’s geographic concentration as a Bahamian insurance provider, which exposes it to catastrophic loss accumulation from hurricanes,” constitutes an “offsetting factor,” which was “particularly evident in the third quarter of 2004 when damage from Hurricanes Frances and Jeanne resulted in significant gross losses.”

Best indicated, however that “BFG’s strong reinsurance program has proven effective in protecting the company’s surplus position, reducing its net incurred losses to a manageable level. In addition, limited investments options in the Bahamas along with falling interest rates have diminished the company’s historic investment returns.”

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