A.M. Best Revises Issuer Credit Rating Outlook to Positive for Members of State National Group
26 August 2016 - 1:55AM
Business Wire
A.M. Best has revised the issuer credit rating (ICR)
outlook to positive from stable and affirmed the financial strength
rating (FSR) of A (Excellent) and the ICRs of “a” of State
National Insurance Company, Inc. and its subsidiaries,
National Specialty Insurance Company and United Specialty
Insurance Company, which operate under a pooling agreement and
are collectively referred to as State National Group (State
National). The outlook for the FSR remains stable.
Concurrently, A.M. Best has revised the outlook to positive from
stable and affirmed the ICR of “bbb” of State National
Companies, Inc. (State National Companies) [NASDAQ: SNC]. All
companies are headquartered in Bedford, TX.
The revised ICR outlook reflects State National’s strong
risk-adjusted capitalization, extended history of sustained
operating profitability driven by its core collateral protection
insurance business and dominant market position providing fronting
services. Additional favorable rating factors include the group’s
extensive enterprise risk management programs tailored to its
business model and capability managing collateralized counter-party
relationships.
These positive rating factors are partially tempered by the
elevated ceded leverage from the extensive use of reinsurance. This
risk is somewhat mitigated by the long-standing and successful
process to maintain collateral to support recoverable amounts.
Furthermore, this risk is controlled by indemnification agreements
contained within the reinsurance contracts. In recent years, the
program business has grown significantly, and this portfolio
includes participation from third-party capital providers.
The ratings of State National Companies are based on its role as
the ultimate parent holding company of State National. As of Dec.
31, 2015, debt-to-capital and debt-to-tangible capital ratios
(excluding other comprehensive income/loss) were 14.5% and 14.8%,
respectively. Furthermore, interest coverage and cash flow for the
parent is exceptionally strong.
The ratings of State National and State National Companies could
receive positive support from improved operating results or further
advancements in overall profitability. Key factors that could
result in negative rating action include a significant decline in
stand-alone risk-adjusted capitalization, operating performance
over a sustained period that does not meet A.M. Best’s
expectations, significant adjustments to the organization's
business model, including provisions in the reinsurance treaties,
or a dispute regarding reinsurance recoverable amounts.
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.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20160825005944/en/
A.M. BestRobert Raber, +1-908-439-2200, ext.
5696Senior Financial
Analystrobert.raber@ambest.comorAnthony Diodato,
+1-908-439-2200, ext. 5704Group Vice
Presidentanthony.didato@ambest.comorChristopher
Sharkey, +1-908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1-908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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