A.M. Best Downgrades Ratings of National Financial Group (Puerto Rico) and Its Members
A.M. Best Co. has downgraded the financial strength rating (FSR) to B+ (Good) from B++ (Good) and issuer credit ratings (ICR) to “bbb-” from “bbb” of National Financial Group (NFG) and its members. NFG consists of National Insurance Company (NIC) and National Group Insurance Company (NGIC), which operate through an intercompany reinsurance agreement. Concurrently, A.M. Best has downgraded the FSR to B+ (Good) from B++ (Good) and the ICR to “bbb-” from “bbb+” of National Life Insurance Company (NALIC). The outlook for all ratings is negative. All companies are domiciled in Hato Rey, PR.
These rating actions reflect NFG’s poor operating performance driven by ongoing underwriting losses and the weak economy in its key market. While management has taken initiatives to protect policyholders and limit surplus erosion through a capital infusion, enhanced data management initiatives and the development of a solid reinsurance program, NFG has failed to achieve the expected underwriting results in recent years with continued weak performance projected for 2010.
The outlook reflects A.M. Best’s expectation for continued weak operating results given NFG’s ongoing challenges in Puerto Rico, combined with planned growth initiatives in Florida, which weakens overall capitalization.
Despite the downgrading of the ratings, NFG maintains adequate capitalization and solid investment income. The group also benefits from its well-recognized brand name and established agency relationships in Puerto Rico.
The rating actions on NALIC reflect a decline in its risk-adjusted capitalization, mixed operating results and its cross ownership between NIC and NALIC.
Somewhat offsetting these negative rating factors are NALIC’s business growth, generally consistently positive operating results and its long established name recognition in Puerto Rico market.
For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at http://www.ambest.com/ratings/methodology.
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