Best’s News & Research Service - May 13, 2015 02:50 PM (EDT)
A.M. Best Downgrades Ratings of National Insurance Company of Wisconsin, Inc.
Oldwick //BestWire// - A.M. Best has downgraded the financial strength rating to B+ (Good) from B++ (Good) and the issuer credit rating to "bbb-" from "bbb" of National Insurance Company of Wisconsin, Inc. (NICW) (Brookfield, WI). The outlook for both ratings is stable.
The rating actions reflect projected significant decreases in premium revenue and absolute capital and surplus, in addition to modest net losses, for both 2015 and 2016. These projections are based on management's actions and intended actions in 2015 to prepare the company for sale. A.M. Best believes these projected results reflect a diminished business profile indicative of a company whose business is in run-off, as NICW's business at year-end 2016 is projected to reflect only reserves and no reported premium revenue.
NICW has historically written and assumed primarily group long-term disability (LTD) business and ceded a portion of this segment. Additionally, the company has held a small block of closed, ceded long-term care (LTC) business in recent years. In early 2015, management suspended direct premium writing, reinsured the entire LTD business and decided to discontinue assumption of premium by mid-year. NICW's projected net losses and deterioration in absolute capital and surplus stem from anticipated expenses incurred to prepare the company for sale and the expected material liquidating dividend payment to the shareholders prior to the sale.
In addition to NICW's diminished business profile, A.M. Best believes that the company may be susceptible to issues in its LTC block should the reinsurer of this business become unable to meet its obligations.
A.M. Best will monitor the impact of sale preparation expenses on operating results and dividend distributions on capital and surplus over the near-to-medium term, as well as any actions by management to manage its LTC block.
A.M. Best notes the unlikelihood of positive rating movement in the near-to-medium term. Conversely, a negative rating action could occur if net losses materially exceed projections, or if risk-adjusted capital materially deteriorates beyond A.M. Best's expectations.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .
Key insurance criteria reports utilized:
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for U.S. and Canadian Life/Health Insurers
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 visit A.M. Best's Ratings & Criteria Center.
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