Best’s News & Research Service - February 10, 2016 03:30 PM (EST)
A.M. Best Affirms Ratings of National Security Group, Inc. and Its Subsidiaries
- February 10, 2016 03:30 PM (EST)
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of “bbb” of National Security Fire and Casualty Company (NSFC). In addition, A.M. Best has affirmed the FSRs of B+ (Good) and ICRs of “bbb-” of NSFC’s wholly owned subsidiary, Omega One Insurance Company, Inc. (Omega) and the affiliated life/health insurer, National Security Insurance Company (NSIC).
Concurrently, A.M. Best has affirmed the ICR of “bb” of the parent holding company, The National Security Group, Inc. (NSGI) (Wilmington, DE) [NASDAQ: NSEC]. The outlook for all ratings is stable. All companies are domiciled in Elba, AL, unless otherwise specified.
The ratings of NSFC are based on the consolidation of the company with its wholly owned subsidiary, Omega. The ratings and outlook for NSFC reflect the improved operating performance and capitalization along with the stability and planning to eliminate its holding company debt. Surplus has increased in recent years, and pro forma 2015 reflects solid surplus growth as well. Management has developed a long-term plan to reduce holding company debt, and the earnings in the insurance subsidiaries will assist in the process. Additionally, management has put initiatives in place to further enhance operating performance by streamlining operations and consolidating departments.
Partially offsetting these positive rating factors is the geographic concentration of its operations in the southeastern United States. As a property writer, surplus is exposed to the impact of frequent and severe weather-related events.
The ratings of Omega reflect its strong risk-adjusted capitalization and low underwriting leverage. A.M. Best expects Omega’s capitalization to continue to improve, and earnings should remain positive mainly from investment income and favorable loss reserve development.
In affirming the ratings of NSIC, A.M. Best believes the company’s financial resources will not be materially impacted as it supports the overall expense and debt obligations of NSGI. The ratings also acknowledge NSIC’s solid stand-alone risk-adjusted capitalization, modest capital growth, positive – albeit modest – net operating performance trends and its multiple distribution channel strategy.
Offsetting these positive factors are NSIC’s limited geographic profile and the challenges it faces to manage its limited levels of capital, sustain and improve its overall net operating performance and reverse declining total net premium trends.
The rating of NSGI is based on the consolidated financial strength of its subsidiaries, which is driven mainly by the property/casualty companies and its acceptable level of debt.
This press release relates to rating(s) 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.
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