A.M. Best Affirms Credit Ratings of State National Group’s Members
September 22 2017 - 11:37AM
Business Wire
A.M. Best has affirmed the Financial Strength Rating
(FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) of “a” of State National Insurance Company,
Inc. and its subsidiaries, National Specialty Insurance
Company, United Specialty Insurance Company, City
National Insurance Company and Independent Specialty
Insurance Company, which operate under a pooling agreement and
are collectively referred to as State National Group (State
National). The outlook of the FSR remains stable, while the outlook
of the Long-Term ICR remains positive. All companies are
headquartered in Bedford, TX.
Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb”
of State National Companies, Inc. (State National Companies)
(headquartered in Bedford, TX) [NASDAQ: SNC]. The outlook of this
Credit Rating (rating) is positive.
The ratings reflect the insurance operating companies’ strong
risk-adjusted capitalization, extended history of sustained
operating profitability driven by its core collateral protection
insurance business, and dominant market position providing fronting
services. Additional favorable factors include the extensive
enterprise risk management programs specialized to the State
National business model and comprehensive capabilities managing
collateralized counterparty relationships.
These positive rating factors are tempered partially by the
elevated credit risk associated with the group’s extensive use of
reinsurance within the program business. In recent years, this
business has grown significantly. The high ceded reinsurance
leverage risk is mitigated largely by the collateral held by State
National, which is adjusted to account for the credit quality of
its reinsurers. The risk also is controlled by the indemnification
agreements contained within the reinsurance contracts, which
transfer the run-off risk directly to the reinsurer. Additionally,
portions of these writings are supported by reinsurance placed with
high quality reinsurers.
The affirmation of the Long-Term ICR of State National Companies
is based on its role as the ultimate parent holding company for the
State National insurance operating companies. As of June 30, 2017,
debt-to-capital and debt-to-tangible capital ratios (excluding
other comprehensive income/loss) were 12.3% and 12.8%,
respectively. Furthermore, interest coverage and cash flow for the
parent is exceptionally strong.
The rating could receive positive support from further
advancements in operating results or overall profitability. Factors
that could result in negative rating action include a significant
contraction in stand-alone risk-adjusted capitalization, operating
performance over a sustained period falling short of historical
results, significant modifications to the organization's business
model including adapting disadvantageous provisions in the
reinsurance treaties, or a dispute regarding reinsurance
recoverable amounts.
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 the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20170922005508/en/
A.M. BestRobert Raber, +1 908 439 2200, ext.
5696Senior Financial
Analystrobert.raber@ambest.comorGreg Williams, +1 908
439 2200, ext. 5815Senior
Directorgreg.williams@ambest.comorChristopher
Sharkey, +1 908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1 908 439 2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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