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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 08, 2011 12:00 AM (EST)
A.M. Best Co. has upgraded the issuer credit rating (ICR) to "bbb+" from "bbb" and affirmed the financial strength rating of B++ (Good) of National American Insurance Company (NAICO) (Chandler, OK). The outlook for both ratings is stable.
The ICR upgrade reflects NAICO's excellent risk-adjusted capitalization, stable operating performance and long-standing regional market presence within Oklahoma and Texas. The ratings also consider the improved financial leverage and interest coverage of the organization on an enterprise basis. NAICO's ultimate parent company, Chandler Insurance Company, Ltd., (Chandler Ltd) received a capital contribution of $6,979,000, which was utilized to retire an outstanding debt debenture at the immediate parent company, Chandler (USA), Inc. Accordingly, A.M. Best has withdrawn the ICR of "bb" and debt rating of "bb" on 24 million 8.75% senior debentures, due 2014 of Chandler (USA), Inc. This transaction has improved the financial leverage measures of the organization, lowering the debt-to-total capital ratio, while improving interest coverage ratios going forward. Both measures are within A.M. Best parameters for the current ratings.
These factors are somewhat offset by the relatively low level of investment earnings; and therefore, total return measures. Other offsetting factors include NAICO's high level of reinsurance dependence to support operations, including the reinsurance placed with Chandler Ltd. This concern is somewhat mitigated by NAICO's use of trust account deposits provided by Chandler, Ltd. Despite these concerns, the outlook reflects NAICO‘s improved risk-adjusted capital position, diminishing loss reserve development reported in recent calendar years, and management's projections for sound operating profitability over the near term.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "A.M. Best's Ratings & The Treatment of Debt", "Equity Credit for Hybrid Securities"; and "Natural Catastrophe Stress Test Methodology." Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.