A.M. Best Maintains Proformance Insurance Company's Under Review Status Following Acquisition Announcement

  
    
  
  
    
      A.M. Best Co. is maintaining the under review status with 
      negative implications of the financial strength rating (FSR) of B++ 
      (Good) and issuer credit rating (ICR) of “bbb” 
      of Proformance Insurance Company (Proformance). Concurrently, 
      A.M. Best is maintaining the under review status with negative 
      implications of the ICR of “bb” 
      of the holding company, National Atlantic Holdings Corporation (National 
      Atlantic) (both domiciled in Freehold, NJ) [NASDAQ: 
      NAHC].
    
    
      The decision to maintain the under review status is based on Proformance’s 
      holding company, National Atlantic, entering into a definitive agreement 
      on March 13, 2008 to be acquired by a subsidiary of Palisades Safety 
      and Insurance Association (Berkeley Heights, NJ), a New Jersey 
      licensed insurance exchange. The closing of the transaction is expected 
      to occur in third quarter 2008, and is subject to the approval of 
      National Atlantic’s shareholders, certain 
      regulatory approvals and the satisfaction or waiver of other closing 
      conditions.
    
    
      On November 20, 2007, Proformance and National Atlantic’s 
      ratings were placed under review with negative implications due to the 
      ineffectiveness of certain claims oversight processes with respect to 
      Proformance’s bodily injury claims function 
      and the subsequent deterioration in A.M. Best’s 
      view of its risk-adjusted capitalization. During third quarter 2007, 
      management determined that Proformance’s 
      procedures related to bodily injury claims handling and reserving were 
      not applied consistently throughout the organization, which resulted in 
      a $14.3 million increase in loss reserves for third quarter 2007. 
      Consequently, risk-adjusted capitalization declined to a level below the 
      minimum required for Proformance’s ratings. 
      Although A.M. Best previously had contemplated adverse loss reserve 
      development in its assessment of risk-adjusted capitalization, the 
      timing and amount of the reserve strengthening was unexpected. While 
      Proformance has retained an independent claims consulting firm to 
      address these issues, A.M. Best remains somewhat concerned regarding 
      overall management oversight.
    
    
      Accordingly, Proformance and National Atlantic’s 
      ratings will remain under review with negative implications until this 
      transaction is completed, at which time A.M. Best will re-evaluate the 
      ratings. However, failure to complete this transaction will likely 
      result in a downgrade of the ratings.
    
    
      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.