|[November 14, 2012]
A.M. Best Revises Outlook to Positive for National American Insurance Company
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has revised the outlook to positive from stable and
affirmed the financial strength rating of B++ (Good) and issuer credit
rating of "bbb+" of National American Insurance Company
(NAICO) (Chandler, OK).
Factors supporting the ratings include NAICO's excellent risk-adjusted
capitalization, stable operating performance and long-standing regional
market presence. The ratings also consider the financial leverage and
interest coverage of the organization on a consolidated enterprise
level, which has improved in recent years due in part to the retirement
of a $6.9 million debenture at the immediate parent company level,
Chandler (USA), Inc. This transaction improved the financial leverage,
currently 18.1%, and cash coverage measures of the organization, both of
which are within A.M. Best's parameters for NAICO's current ratings.
Partially offsetting these positive rating factors are NAICO's
relatively low level of investment earnings resulting in low total
return measures. Other offsetting factors include NAICO's high level of
reinsurance dependence to support its operations, including reinsurance
placed with its ultimate parent, Chandler Insurance Company, Ltd.
(Chandler, Ltd.) (Cayman Islands). This concern is somewhat mitigated by
NAICO's use of trust account deposits provided by Chandler, Ltd.
Despite these concerns, the outlook reflects NAICO's improving
risk-adjusted capital position, stable operating performance over the
recent five-year period and management's projections for sustained
operating profitability over the near term.
Positive rating actions could occur over the longer term if the company
can sustain the recent improvement in its operating performance, which
would permit additional growth in surplus in support of its planned
premium growth. However, negative rating actions could occur should
adverse reserve development occurring on prior accident years negatively
impact NAICO's operating performance, and/or premium growth in excess of
projections weakens overall capitalization to a level that no longer
supports its ratings.
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. Key criteria utilized include:
"Understanding BCAR for Property/Casualty Insurers"; "Risk Management
and the Rating Process for Insurance Companies"; "Catastrophe Analysis
in A.M. Best's Ratings"; "Insurance Holding Company and Debt Ratings";
"Equity Credit for Hybrid Securities"; "Rating Members of Insurance
Groups"; and "The Treatment of Terrorism Risk in the Rating Evaluation."
Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, 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 © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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