AM Best Revises Outlooks to Negative for The National Security Group, Inc. and Its Subsidiaries
AM Best has revised the outlooks to negative for National Security Fire and Casualty Company (NSFC) and its affiliated companies, including National Security Insurance Company (NSIC) and Omega One Insurance Company. The FSR for NSFC and NSIC remains B++, while Omega is rated B+. This revision reflects pressure on NSFC's balance sheet due to significant capital declines from catastrophic losses. Concerns arise over the company's ability to manage capital in future catastrophe events, especially given its geographic concentration in the southeastern U.S.
- NSFC maintains a strong balance sheet strength assessment.
- AM Best's affirmation of ratings indicates some stability despite challenges.
- Outlook revised to negative due to significant capital declines from catastrophic weather-related losses.
- Limited business profile and geographic concentration expose the company to future risks.
- Concerns about deteriorating capital quality and potential further losses.
AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of National Security Fire and Casualty Company (NSFC). AM Best also has revised the outlooks to negative from stable and affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb” of NSFC’s affiliated life/health insurer, National Security Insurance Company (NSIC). In addition, AM Best has revised the outlooks to negative from stable and affirmed the FSR of B+ (Good) and the Long-Term ICR of “bbb-” of NSFC’s wholly owned subsidiary, Omega One Insurance Company, Inc. (Omega). Concurrently, AM Best has revised the outlook to negative from stable and affirmed the Long-Term ICR of “bb” of The National Security Group, Inc. (Wilmington, DE) [NASDAQ: NSEC], the parent holding company. All companies are domiciled in Elba, AL, unless otherwise specified.
The ratings of NSFC reflect its balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). The outlooks of NSFC have been revised to negative from stable to reflect pressure on its balance sheet after experiencing significant capital declines driven by catastrophic weather-related losses. Although the negative impact on surplus was offset largely through the issuance of an intercompany surplus note, AM Best is concerned that NSFC’s quality of capital would continue to diminish if there were a need to replenish capital following another active catastrophe year. NSFC’s limited business profile is driven by its geographic concentration in southeastern states exposing results to future weather-related events. Rating pressure may result on the group’s ERM assessment if it fails to execute on specific risk management-related corrective actions including transitioning away from certain catastrophe-prone locations and implementing rate actions in states where it writes business. Negative rating pressure also may occur if operating results fall short of management’s expectations, or if volatility from catastrophe activity results in further outsized losses, or from a significant deterioration in capital strength.
The ratings of NSIC reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate ERM. The outlooks of NSIC have been revised to negative from stable following the significant decline in surplus in 2020 as a result of lending capital via a surplus note to its affiliated property/casualty company, NSFC, which experienced an increase in frequency and severity of catastrophe losses.
The ratings of Omega reflect its balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, very limited business profile and appropriate ERM. The outlooks of Omega have been revised to negative from stable driven by a recent loss of surplus, with Omega’s ability to absorb future net losses becoming more limited as it reinsures
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FAQ
What is the reason for the negative outlook on NSEC's ratings?
What are the current ratings for National Security Fire and Casualty Company?
How does the recent rating action affect NSIC and Omega?
What is the impact of geographic concentration on NSFC?
