Press Release - OCTOBER 09, 2018
A.M. Best Affirms Credit Ratings of National General Holdings Corp. and Subsidiaries
FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 09, 2018
The ratings reflect National General Group’s balance sheet strength, which A.M. Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The assessment of balance sheet strength reflects National General Group’s risk-adjusted capitalization, the solid investment portfolio and the strength of the group’s reinsurance panel, as well as its generally favorable loss reserve development pattern. These positive factors are offset by a modest amount of adverse development in the group’s automobile loss reserves in recent years, and by the substantial level of goodwill and intangibles on NGHC’s balance sheet.
The group’s operating performance is derived from its loss ratio, which consistently outperforms those of its non-standard automobile composite peers. While the group’s statutory underwriting and operating results modestly underperformed the peer group over the past five years, the group’s profitability on a GAAP basis (which considers the benefit of the group’s fee-based revenues) is significantly better than its statutory performance metrics. In addition, the group’s returns on revenue and equity generally outperform its composite average, although 2017 results were impacted negatively by catastrophes and severe weather.
National General Group’s business profile assessment reflects its diverse operations within the United States, which are concentrated in personal lines, primarily automobile. The saturated nature of the group’s target markets has resulted in most of its significant growth coming through acquisitions historically. NGHC has a developed ERM framework, and its risk management capabilities are generally in line with its risk profile.
Adjusted debt leverage at NGHC is in line with guidelines for its current rating, as is its interest coverage. Debt to tangible capital metrics are elevated relative to peers, reflecting the goodwill and intangibles associated with the enterprise’s acquisition strategy. Given the income generation of these acquisitions, the capital position is expected to increase over time, creating an improved level of tangible to total capital.
The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed for the following insurance subsidiaries of National General Holdings Corp.:
The following Long-Term IRs have been affirmed:
National General Holdings Corp.—
— “bbb-” on $100 million 6.75% senior unsecured notes, due 2024
— “bbb-” on $250 million 6.75% senior unsecured notes, due 2024
— “bb+” on $100 million 7.625% subordinated notes, due 2055
— “bb” on $200 million 7.5% preferred stock
— “bb” on $150 million 7.5% preferred stock
— “bb” on $55 million 7.5% preferred stock
The following indicative Long-Term IRs have been affirmed:
National General Holdings Corp.—
— “bbb-” on senior unsecured debt
— “bb+” on subordinated debt
— “bb” on preferred stock
— “bb” on junior subordinated debt
This press release relates to Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry.