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AM Best reported it revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of NAMIC Insurance Co. Inc. (NAMICO) in Indianapolis, Indiana.
The negative outlooks reflect a trend of deteriorating underwriting performance in recent years, attributable to an increase in the number of high severity losses, the ratings agency said. NAMICO’s losses have resulted in combined ratios that have been significantly elevated in two of the past five years.
AM Best categorizes NAMICO’s balance sheet strength as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The negative outlooks also reflect AM Best’s concern regarding the company’s ERM process. In particular, there has been a demonstrated weakness in the company’s overall claims management process. Most recently, the company was required to re-file its 2019 annual statement due to a reserve increase for the 2019 financial year. Accordingly, this was classified as a Type 1 – Subsequent Event that led to a sizeable increase in the reported combined ratio. While management is undertaking a number of initiatives to address this issue, including a review of all open and potential claims and process changes as it applies to claims tracking, the ultimate effectiveness of these efforts is somewhat uncertain.
AM Best’s balance sheet strength assessment of very strong is supported by NAMICO’s risk-adjusted capitalization being at the strongest level, along with positive growth in policyholders’ surplus over the past five years that was offset partially by limitations in its financial flexibility and scale of operations. NAMICO’s neutral business profile assessment is driven largely by its strong niche market in the mutual insurer segment coupled with the company’s favorable geographic diversification.
Source: AM Best