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FOR IMMEDIATE RELEASE
OLDWICK - FEBRUARY 29, 2016 04:17 PM (EST)
A.M. Best has revised the issuer credit rating (ICR) outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and the ICR of “a” for Nodak Mutual Group (Nodak) members, Nodak Mutual Insurance Company (Nodak Mutual) (Fargo, ND) and its reinsured affiliate, Battle Creek Mutual Insurance Company (Battle Creek, NE). The outlook on Nodak’s FSR remains stable.
Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the FSR of B++ (Good) and the ICR of “bbb+ of American West Insurance Company (American West) (Fargo, ND), a wholly owned and separately rated subsidiary. Nodak’s positive outlook on the ICR is reflective of the group’s solid capitalization, positive operating results and market profile as one the leading writers of property/casualty insurance in North Dakota. Surplus growth in four of the past five years is attributable to overall positive underwriting income complemented by a steady stream of net investment income. The group’s long-term favorable operating results arise from management’s conservative operating strategies and local market expertise.
Somewhat offsetting these positive rating factors is Nodak’s concentration of business in North Dakota, which exposes it to the potential for frequent and severe weather-related events, as well as judicial and regulatory actions. In an effort to mitigate concentration of property lines, in December 2014 Nodak purchased Primero Insurance Company, a non-rated wholly owned subsidiary that writes non-standard automobile coverage primarily in Nevada. Nodak also mitigates business concentration through ceded reinsurance treaties.
Future positive rating action is possible with the continuation of strong capitalization and favorable operating performance. Negative rating action could occur as a result of an unexpected and material decline in risk-adjusted capitalization or a sustained deterioration in operating performance.
The positive outlooks for American West are reflective of the company’s continued solid capitalization and favorable operating performance. American West also benefits from the explicit and implicit support of the Nodak group as it is fully integrated in the group’s enterprise risk management and is protected by the group’s extensive reinsurance program.
Partially offsetting these positive rating factors are the company’s geographic concentration of risk and limited product offerings. Business is produced in South Dakota, Minnesota, and North Dakota, which subjects results to frequent and severe weather-related events. In addition, crop results are in direct correlation with commodity pricing which management has no control over.
Positive rating action is contingent on the company’s continued favorable operating results while maintaining its solid risk-adjusted capitalization. Negative rating action may follow an unexpected and material decline in risk-adjusted capitalization, a sustained deterioration in operating performance, or changes in the relationship with the parent company.
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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