OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to Lexington National Insurance Corporation (Lexington National) (Orlando, FL). The outlook assigned to these Credit Ratings (ratings) is stable.
Lexington National has been operational for approximately 30 years and primarily writes bail bond insurance. Lexington National is licensed in all 50 states and currently conducts business in 46 of those and Washington D.C.
The ratings reflect Lexington National’s solid risk-adjusted capitalization, strong underwriting focus and well-established market presence. Lexington National’s solid risk capital position is reflective of its moderate underwriting leverage, conservative investment profile and prudent use of collateral. In addition, Lexington National is continuing to execute a gradual product diversification and refinement strategy within its current geographic footprint, which is also designed to improve operating performance. Pre-tax operating income has been supplemented by a consistent level of net investment income that has helped grow surplus in each of the last five years despite the low interest rate environment. Furthermore, A.M. Best expects the company’s investments in technology and product development to continue to improve operating efficiencies.
Partially offsetting these positive rating factors is Lexington National’s above-average expense ratio driven by above average commission costs and currently limited product offerings. This product concentration exposes the group to potential regulatory and legal changes. This is particularly true given recent bail reform measures in a number of states. While Lexington National has a fair amount of geographic diversification and plans for additional product expansion, execution risk remains an offsetting factor. However, Lexington National’s expense disadvantage is partially offset by the profitability underlying its core book of business as reflected by its five-year average pure loss ratio, which compares favorably with the fidelity and surety composite.
Positive rating action could occur if the company demonstrates consistent above-average earnings while maintaining strong risk-adjusted capitalization. Negative rating action could occur if there is a negative earnings trend that develops and causes risk-adjusted capitalization to deteriorate or an adverse legal or regulatory change that would significantly impact the company's ability to maintain its current product offerings.
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