Press Release - APRIL 19, 2016

A.M. Best Revises Outlook to Stable for National Lloyds Insurance Company


CONTACTS:
 Brian O’Larte
Senior Financial Analyst
+1 908 439 2200, ext. 5138
brian.o’larte@ambest.com

Joseph Burtone
Assistant Vice President
+1 908 439 2200, ext. 5125
joseph.burtone@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - APRIL 19, 2016
A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of “a” of National Lloyds Insurance Company (National Lloyds). Additionally, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” of National Lloyds’ affiliate, American Summit Insurance Company (American Summit). The outlook for each of these ratings is stable. National Lloyds and American Summit are domiciled in Waco, TX, and are subsidiaries of Hilltop Holdings Inc. [NYSE: HTH].

The revised outlook for National Lloyds’ reflects its improved underwriting and operating performance over the past three years, primarily driven by management’s corrective initiatives: significant rate increases, non-renewal of unprofitable business, restrictive endorsements, increased inspections on all new and renewal policies and strict agency management. Additionally, the management team has also strengthened the company’s reinsurance program and risk-adjusted capitalization.

The affirmation of National Lloyds’ ratings recognizes its solid risk-adjusted capitalization, conservative investment philosophy, sound balance sheet liquidity that is enhanced by generally positive operating cash flows and its local market expertise within its niche market of personal property insurance. Additionally, the ratings recognize National Lloyds’ positive actions taken by management to improve earnings, which resulted in improved underwriting performance in 2014 and 2015. National Lloyds also benefits from the financial flexibility of its ultimate parent, Hilltop Holdings Inc., which was evidenced in 2012 by its explicit support in the form of a capital contribution to offset underwriting losses.

Partially offsetting these positive rating factors are the company’s volatile underwriting results in the earlier part of the most-recent five-year period, which was driven by variety of frequent and severe weather-related events, above-average expense structure and geographic concentration risk.

The ratings of American Summit reflect its strong risk-adjusted capitalization, generally profitable operating performance that was generated by steady investment income, other income and capital gains over the past five years. Additionally, the company’s ratings also recognize its stable loss reserving trends, conservative investment philosophy and excellent liquidity measures.

These positive rating factors are partially offset by American Summit’s varying underwriting performance that resulted in underwriting losses in two of the past five years. The company’s underwriting losses were driven by increased weather-related events and elevated losses from an affiliated quota share reinsurance agreement with National Lloyds. American Summit maintains a prudent catastrophe reinsurance program in conjunction with National Lloyds to mitigate losses associated with severe weather-related catastrophe events. American Summit’s product offering and geographic concentration is somewhat limited, as it is primarily a provider of insurance for the mobile home market with majority of the business is conducted in Arizona.

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.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.


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