OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of National Security Fire and Casualty Company (NSFC). In addition, AM Best has affirmed the FSR of B+ (Good) and Long-Term ICR of “bbb-” of NSFC’s wholly owned subsidiary, Omega One Insurance Company, Inc. (Omega). Concurrently, AM Best has affirmed the Long-Term ICR of “bb” of The National Security Group, Inc. (NSGI) (Wilmington, DE) [NASDAQ: NSEC], the parent holding company. The outlook of these Credit Ratings (ratings) is stable.
AM Best also has upgraded the FSR to B++ (Good) from B+ (Good) and Long-Term ICR to “bbb” from “bbb-” of NSFC’s affiliated life/health insurer, National Security Insurance Company (NSIC). The outlook of the ratings has been revised to stable from positive. All companies are domiciled in Elba, AL, unless otherwise specified.
The ratings of NSFC reflect the company’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). These assessments are based on the consolidation of NSFC and Omega. AM Best assesses NSFC’s risk-adjusted capitalization, based on Best’s Capital Adequacy Ratio (BCAR), at the strongest level; however, balance sheet strength is diminished by a surplus note issued by Omega One, debt at the holding company and volatility in surplus growth due to inconsistent underwriting performance. Debt leverage at NSGI has been improving as a result of the retirement of debt. The publicly traded parent also provides an added degree of financial flexibility.
AM Best considers NSFC’s operating performance to be marginal due to underwriting volatility and below-average overall earnings, which is primarily attributed to catastrophic weather events and weak investment markets. NSFC’s business profile is viewed as limited, and with its geographic concentration as a property insurer in the southeastern United States, the company’s earnings will remain susceptible to the effects of frequent and severe weather-related events. An experienced management team is addressing these challenges with an ERM approach that identifies and manages all risks as disclosed in NSGI’s annual public filings.
The ratings of Omega reflect its balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, very limited business profile and appropriate ERM. Currently, Omega’s sole purpose is to provide limited catastrophe loss coverage to NSFC, and its earnings could be negatively impacted if severe weather events breach the level of reinsurance cover Omega provides to NSFC.
The ratings of NSIC reflect its balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate ERM. NSIC’s balance sheet strength assessment was revised upward to strong from adequate, due to continued capital growth trends sourced from net earnings, combined with diminished future debt-service demands at NSGI.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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