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FOR IMMEDIATE RELEASE
NEW YORK - DECEMBER 02, 2016 11:42 AM (EST)
A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of the members of Main Street America Group (MSAG). The outlook of these Credit Ratings (ratings) is stable.
Concurrently, A.M. Best has assigned a Long-Term Issue Credit Rating of “bbb+” to the $70 million 7.25% 20-year surplus notes issued by the lead company, NGM Insurance Company (NGM) (Jacksonville, FL).The outlook assigned to the rating is stable.
The ratings reflect MSAG’s focused marketing and branding strategies, disciplined underwriting philosophy and pricing segmentation, and have engendered MSAG’s solid risk-adjusted capitalization, historically positive operating performance, diversified product offerings and established regional market presence along the East Coast. Partially offsetting these positive rating factors are the group’s underwriting leverage that is slightly higher than its industry composite and its expense ratios that also are above their peer composite mainly due to higher commissions on their commercial book of business, susceptibility to weather-related losses in its geographic footprint, and competitive market conditions throughout its underwriting footprint combined with a recent slumping of its core underwriting results exacerbated by lower investment yields — a product of the current financial market conditions.
A.M. Best does not expect to downgrade or place a negative outlook on the ratings of the members of MSAG in the near to midterm. Such actions would ensue if the group were to incur material losses in its risk-adjusted capitalization; not be able to show a revitalized profitability of its core book of business after this recent set of improvements; be unable to contain the group’s exposure to catastrophe events within its underwriting footprint with the current set of preventative measures that recently have been put in place; or have substantial adverse reserve development relative to its peers, as well as the industry’s averages.
NGM issued $70 million in surplus notes in a private issuance to a single investor. The notes are replacing $70 million in preferred shares, (which are in the process of being called), at the intermediate holding company, Main Street America Group, Inc. The 7.25% interest rate of the new surplus notes is not only lower, but the interest also is tax deductible, making the cost capital approximately half of what it was with the preferred shares in place. The term for these notes is twenty years and interest is non-deferrable. There are no conversions, and the principle is one balloon payment at the end of the term. The rating is supported by the company’s and group’s strong capital position, redefined market profile and improving operating performance.
The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed for the following members of Main Street America Group:
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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.
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