A.M. Best has affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of “a-” of the insurance subsidiaries of National General Holdings Corp. (National General Holdings) (headquartered in New York) [NASDAQ:NGHC], also known as National General Group (National General). Concurrently, A.M. Best has affirmed the ICR and senior debt ratings of “bbb-” of National General Holding. The outlook for all ratings is stable. (See below for a detail list of the companies and ratings.)
These ratings reflect the group’s solid risk-adjusted capitalization, the historically profitable operating performance of the group’s personal lines books of business, a well-established market presence and an increase in efficiency and pricing sophistication from a recently completed system enhancement, which has enabled the group to process an increase in premium volumes. Additionally, the ratings take into consideration the completed equity offerings of National General Holdings in each of the last three years (2013-2015) and their beneficial impact on the overall financial flexibility, liquidity and improved statutory risk-adjusted capitalization of National General.
These positive rating factors are partially offset by operating losses in three out of the past five years, primarily driven by variable underwriting results due to increased loss frequency, loss reserve strengthening and weather-related losses. In addition, the execution risk on business assumed through the Tower Personal Lines Reinsurance Agreement transaction, including the increase in the group’s property exposures, could result in increased variability in results, driven by the vagaries of weather and catastrophe events. However, this risk is somewhat mitigated through a strong reinsurance program.
Key rating factors that may lead to future positive rating actions include the group outperforming its projections and peers over an extended period of time. However, negative rating actions could result if the group’s operating performance falls short of expectations or its risk-adjusted capitalization declines to a level that no longer supports the ratings of its members.
The FSR of A- (Excellent) and the ICRs of “a-” have been affirmed for the following insurance subsidiaries of National General Holdings Corp.:
- New South Insurance Company
- National General Assurance Company
- Integon National Insurance Company
- Integon Indemnity Corporation
- Integon General Insurance Corporation
- Imperial Fire and Casualty Insurance Company
- National Automotive Insurance Company
- MIC General Insurance Corporation
- National General Insurance Company
- National Health Insurance Company
- Integon Casualty Insurance Company
- Integon Preferred Insurance Company
- National General Insurance Online Inc.
- Personal Express Insurance Company
The following debt ratings have been affirmed:
National General Holdings Corp.—
-- “bbb-” on $250 million 6.75% senior unsecured notes, due 2024
-- “bb” on $205 million 7.5% preferred stock
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:
- Analyzing Insurance Holding Company Liquidity
- Catastrophe Analysis in A.M. Best Ratings
- Equity Credit for Hybrid Securities
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
- Understanding Universal BCAR
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 visit A.M. Best’s Ratings & Criteria Center.
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 © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Brian O’Larte, (908) 439-2200, ext. 5138
Senior Financial Analyst
Michael Lagomarsino, CFA, (908) 439-2200, ext. 5810
Assistant Vice President
Christopher Sharkey, (908) 439-2200, ext. 5159
Manager, Public Relations
Jim Peavy, (908) 439-2200, ext. 5644
Assistant Vice President, Public Relations