Best’s News & Research Service - June 24, 2022 09:43 AM (EDT)
AM Best Downgrades Credit Ratings of Members of NLC Insurance Companies Pool
- June 24, 2022 09:43 AM (EDT)
Oldwick //BestWire// - AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb+” (Good) from “a-” (Excellent) of New London County Mutual Insurance Company, Hingham Mutual Fire Insurance Company, Thames Insurance Company, Inc. and Danbury Insurance Company, which operate under an intercompany pooling agreement and are collectively referred to as NLC Insurance Companies Pool (NLC). The outlook of the FSR has been revised to stable from negative, while the outlook of the Long-Term ICR is negative. All companies are headquartered in Norwich, CT.
The Credit Ratings (ratings) reflect NLC’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The rating downgrades are based on deteriorating trends in NLC’s operating performance in recent years, largely reflective of an increased frequency and severity of weather-related events and adverse development in its liability and assumed property lines of business. Additionally, increased expenses associated with the amortization of a new policy administration system and elevated commission costs, typical of New England carriers, contribute to NLC’s high underwriting expense ratio.
The negative outlook of the Long-Term ICR reflects the ongoing deterioration in NLC’s operating performance. Without sustained improvement, this could lead to a downward revision in the overall assessment of balance sheet strength and/or business profile in the near to intermediate term.
NLC maintains strong overall balance sheet strength, marginally supported by very strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is offset somewhat by limited surplus growth. AM Best views NLC’s business profile as neutral, as its geographic spread of risk is concentrated strategically in Connecticut, Massachusetts and Rhode Island, and distributed through a strong independent agency network. However, the continued deterioration in operating performance due in large part to increased underwriting volatility has placed greater weight on NLC’s geographic and product concentration in the evaluation of its business profile assessment. AM Best views NLC’s ERM framework, which includes a committee led by the CEO and consists of other senior managers that collaborate in identifying risks and developing appropriate risk mitigation procedures, as appropriate for its risk profile.
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.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.