AM Best Revises Issuer Credit Ratings Outlook to Negative for Members of Nodak Insurance Group and NI Holdings, Inc.

Rhea-AI Summary

AM Best has revised the outlook for the Long-Term Issuer Credit Ratings of Nodak Insurance Group and NI Holdings, Inc. from stable to negative, while affirming their Financial Strength Ratings (FSR) of A (Excellent). The revision reflects a deterioration in operating results due to higher catastrophe losses and inflation-driven severity over the past two years, leading to an increased combined ratio of 118.5% in 2022 and a nearly 20% decline in policyholders' surplus. Management's strategies to mitigate volatility include rate adjustments, aggressive re-underwriting, and stricter risk acceptance. Despite these efforts, the potential for further downgrades remains if performance does not improve.

Positive

• Affirmation of FSR at A (Excellent) and Long-Term ICR at 'a+' (Excellent).
• Management's proactive strategies aim to improve operational performance.

Negative

• Outlook for Long-Term ICRs revised to negative due to poor operating results.
• Combined ratio reached 118.5%, indicating financial strain.
• Policyholders' surplus declined nearly 20% due to underwriting and capital losses.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) for the members of Nodak Insurance Group (Nodak). The outlook of the FSR is stable. Concurrently, AM Best has revised the outlook to negative from stable and affirmed the Long-Term ICR of “bbb+” (Good) of NI Holdings, Inc. (Fargo, ND) [NASDAQ: NODK], a publicly traded holding company. (See below for a full listing of companies and Credit Ratings [ratings].)

The ratings reflect Nodak’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The revised outlook of the Long-Term ICRs considers the deterioration in Nodak’s operating results over the past two years, primarily resulting from an abnormal level of catastrophe losses in its core states of operation, along with an increased severity of loss due to inflation. In 2022, the group incurred multiple severe weather-related events, all of which were in the vicinity of its catastrophe retention, and in the year prior, results were dampened by significant conditions impacting the crop lines. Consequently, the group’s combined ratio has been above breakeven for two consecutive years and reached a five-year high of 118.5% in 2022. Also in 2022, underwriting losses coupled with unrealized capital losses due to stock market volatility resulted in the group reporting a nearly 20% decline in policyholders’ surplus.

Nodak’s management is addressing the volatility through rate, inflation guard adjustments, aggressive re-underwriting of its book of business, non-renewing particular coverages and requiring higher deductibles. The group also continues to perform property inspections and will no longer be accepting certain property risks. AM Best expects that these actions will allow Nodak to improve upon its current level of performance and return back to historical norms. Although given the magnitude of the decline, in the absence of improvement, the ratings are likely to be downgraded.

The FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed, with the outlook of the Long-Term ICRs revised to negative from stable, while the outlook of the FSR is stable, for the following members of the Nodak Insurance Group:

• American West Insurance Company
• Battle Creek Mutual Insurance Company
• Direct Auto Insurance Company
• Nodak Insurance Company
• Primero Insurance Company
• Westminster American Insurance Company

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. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230425006076/en/

Lauren Magro

Financial Analyst

+1 908 439 2200, ext. 5181

lauren.magro@ambest.com

Christopher Sharkey

Associate Director, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Joseph Burtone

Director

+1 908 439 2200, ext. 5125

joseph.burtone@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

What is the recent outlook change for NI Holdings, Inc. (NODK)?

AM Best revised the outlook from stable to negative for the Long-Term Issuer Credit Ratings of NI Holdings, Inc. (NODK).

What are the financial ratings of Nodak Insurance Group?

Nodak Insurance Group has an affirmed Financial Strength Rating of A (Excellent) and Long-Term Issuer Credit Ratings of 'a+' (Excellent).

What caused the negative outlook for Nodak Insurance Group?

The negative outlook is due to deteriorating operating results from significant catastrophe losses and increased severity of loss driven by inflation.

What is the combined ratio for Nodak Insurance Group in 2022?

The combined ratio for Nodak Insurance Group reached 118.5% in 2022, marking a five-year high.

What actions is Nodak Insurance Group taking to address financial volatility?

Nodak Insurance Group is implementing rate and inflation adjustments, aggressive re-underwriting, and stricter acceptance of property risks.