A.M. Best Revises Outlook to Stable for National Security Group, Inc. and Its Subsidiaries; Affirms Ratings
14 November 2014 - 2:11AM
Business Wire
A.M. Best has revised the outlook to stable from negative
and 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 National Security
Insurance Company (NSIC), an affiliated life/health insurer.
The outlook for these ratings remains stable.
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 this rating
has been revised to stable from negative. All companies are
domiciled in Elba, AL, unless otherwise specified.
The ratings for NSFC are based on the consolidation of the
company with its wholly owned subsidiary, Omega. The ratings and
revised outlook for NSFC reflect the improved operating performance
and adequate capitalization along with the stability and planning
at the holding company to eliminate its debt. Surplus has increased
in three of the past five years with 2014 on target for solid
surplus growth as well. Management has a long-term plan in place to
pay down holding company debt; the earnings in the insurance
subsidiaries will assist in the process. Additionally, management
has put in place initiatives to further enhance operating
performance by streamlining operations and consolidating
departments. Partially offsetting these positive rating factors is
the geographic concentration in the southeastern United States. As
a property writer, surplus is exposed to frequent and severe
weather-related events. Negative rating action may occur if
operating results begin to deteriorate or if there is a notable
decline in the risk-adjusted capitalization. Positive rating action
is contingent upon consistently favorable operating performance and
improved overall risk-adjusted capitalization.
The ratings of Omega reflect its strong risk-adjusted
capitalization and voluntary run-off status after terminating its
non-standard auto and property insurance programs. The ratings may
come under pressure if capitalization significantly weakens. This
is not expected to occur while the company is in run-off; surplus
is more than adequate to handle any existing open claims.
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.
Future positive rating actions could result from further
positive movement in its parent’s ratings. Key rating factors that
could lead to a negative rating action include a sustained decline
in risk-adjusted capitalization that no longer supports the current
ratings; overall net operating performance that does not meet A.M.
Best’s expectations; a material shift in business profile skewed
more heavily toward less creditworthy lines of business; or
negative rating actions on NSGI or its property and casualty
affiliate, NSFC.
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.
The methodology used in determining these ratings is Best’s
Credit Rating Methodology, which provides a comprehensive
explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Best’s
Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
• Risk Management and the Rating Process for Insurance
Companies
• Understanding BCAR for Property/Casualty Insurers
• Understanding BCAR for U.S. and Canadian Life/Health
Insurers
• A.M. Best’s Liquidity Model for U.S. Life Insurers
• Catastrophe Analysis in A.M. Best Ratings
• Evaluating U.S. Surplus Notes
• Equity Credit for Hybrid Securities
• Rating Members of Insurance Groups
• Evaluating Non-Insurance Ultimate Parents
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestColette Fearon––P/CFinancial
Analyst(908) 439-2200, ext.
5548colette.fearon@ambest.comorJoseph
Burtone––P/CAssistant Vice President(908) 439-2200,
ext. 5125joseph.burtone@ambest.comorSteven
Faulks––L/HSenior Financial Analyst(908) 439-2200,
ext. 5035steven.faulks@ambest.comorThomas
Rosendale––L/HAssistant Vice President(908) 439-2200,
ext. 5201thomas.rosendale@ambest.comorChristopher
SharkeyManager, Public Relations(908) 439-2200, ext.
5159christopher.sharkey@ambest.comorJim
PeavyAssistant Vice President, Public Relations(908)
439-2200, ext. 5644james.peavy@ambest.com
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