OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the financial strength rating (FSR) to B++ (Good) from A- (Excellent) and the issuer credit ratings (ICR) to “bbb+” from “a-” of National Fire and Indemnity Exchange (NFIE) (St. Louis, MO). The outlook for the FSR has been revised to stable from negative, while the outlook for the ICR is negative
The downgrades reflect a deterioration in NFIE’s underwriting results over the latest five-year period and a recent decline in policyholders’ surplus. In 2015, increased claims severity caused underwriting and operating losses that led to a decline in policyholders’ surplus. In addition, the annual refund of subscriber savings accounts to former policyholders contributed to the decline. As a result, NFIE’s performance results lagged behind the commercial casualty composite as evidenced by its elevated five-year average combined ratio, which compares unfavorably with its peers.
Nevertheless, the ratings reflect NFIE’s supportive, albeit declining, risk-adjusted capitalization and its expertise in the specialty niche fabricare industry. Offsetting these positive factors are the volatility in NFIE’s net operating performance given its lack of scale, exposure to hurricane losses and adverse loss reserve development of old environmental claims over the latest five-year period. Despite favorable development on pollution reserves in 2013 from improved reinsurance collections, future positive developments in this area are not expected.
The negative outlook on the ICR is based on A.M. Best’s concern regarding whether NFIE will materially meet its 2016 projections.
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.
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