AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of National Security Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb” (Fair) of National Security Insurance Company (NSIC) (Elba, AL). The outlook assigned to these Credit Ratings (ratings) is negative.

The ratings of NSIC reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).

These rating actions follow various steps that NSIC has taken to improve its capital position and operating results significantly. The overall balance sheet strength assessment improved from weak to adequate following various capital raising initiatives, which included a capital infusion by NSIC’s ultimate parent, PhenixFIN Corporation, following NSIC’s acquisition in 2024 and an executed reinsurance agreement and paydown of intercompany debt in 2025.

The ERM assessment was adjusted from appropriate to marginal. While NSIC’s ERM framework has historically supported the overall organization, AM Best notes that risk management practices have failed to adequately address the overall balance sheet strength assessment at the NSIC level. Rapid annuity premium growth and a lack of operational oversight over the development of an annuity product have led to capital declines, albeit recently improving due to the reinsurance contract and suspension of annuity sales, which will constrain the company’s ability to grow capital organically going forward.

The negative outlooks reflect the continued pressure on the company’s overall balance sheet strength assessment, despite the previously mentioned capital raising initiatives, following a significant decline in risk-adjusted capitalization in recent years. While the reinsurance agreement resulted in significant capital relief, there is significant reinsurance leverage and the agreement is with an unrated reinsurance counterparty, which qualitatively impacts AM Best’s assessment. This is somewhat offset by utilization of a comfort trust that has been modestly over-collateralized. The negative pressure is also driven by the reduced financial flexibility of the holding company as funds were used to pay down debt at the NSIC level, which improved NSIC’s balance sheet but reduced the assets available at the holding company to service its debt obligations.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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