OLDWICK, N.J.,--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of National Security Fire and Casualty Company (NSFC). In addition, AM Best has affirmed the FSR of B+ (Good) and Long-Term ICR of “bbb-” of NSFC’s wholly owned subsidiary, Omega One Insurance Company, Inc. (Omega). AM Best also has affirmed the FSR of B++ (Good) and Long-Term ICR of “bbb” of NSFC’s affiliated life/health insurer, National Security Insurance Company (NSIC). Concurrently, AM Best has affirmed the Long-Term ICR of “bb” of The National Security Group, Inc. (NSGI) (Wilmington, DE) [NASDAQ: NSEC], the parent holding company. The outlook of these Credit Ratings (ratings) remains stable. All companies are domiciled in Elba, AL, unless otherwise specified.
The ratings of NSFC reflect the company’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). These assessments are based on the consolidation of NSFC and Omega. AM Best assesses NSFC’s risk-adjusted capitalization, based on Best’s Capital Adequacy Ratio (BCAR), at the strongest level; however, balance sheet strength is somewhat diminished by a surplus note issued by Omega One, debt at the holding company and volatility in surplus growth due to inconsistent underwriting performance. Debt leverage at NSGI has been improving as a result of the retirement of debt. The publicly traded parent also provides an added degree of financial flexibility.
AM Best considers NSFC’s operating performance to be marginal due to underwriting volatility, which is primarily attributed to catastrophic weather events and weak investment markets. NSFC’s business profile is viewed as limited, and with its geographic concentration as a property insurer in the southeastern United States, the company’s earnings will remain susceptible to the effects of frequent and severe weather-related events. The group’s experienced management team continually addresses these challenges with an ERM approach that identifies and manages all risks as disclosed in NSGI’s annual public filings.
The ratings of Omega reflect its balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, very limited business profile and appropriate ERM. Currently, Omega’s sole purpose is to provide limited catastrophe loss coverage to NSFC. Its capitalization levels could potentially be affected if NSFC is impacted by severe weather events as Omega provides reinsurance coverage for the company.
The ratings of NSIC reflect its balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate ERM. NSIC’s balance sheet strength assessment reflects the strongest level of risk-adjusted capitalization based on its BCAR and capital growth trends, combined with diminishing future debt-service demands at NSGI.
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