AM Best Downgrades Credit Ratings of VR Insurance Holdings, Inc.’s Insurance Subsidiaries; Maintains Under Review With Negative Implications Status
2024年7月19日 - 2:24AM
ビジネスワイヤ(英語)
AM Best has downgraded the Financial Strength Rating
(FSR) to B (Fair) from B++ (Good) and the Long-Term Issuer Credit
Rating (Long-Term ICR) to “bb” (Fair) from “bbb” (Good) of National
Security Fire and Casualty Company (NSFC). AM Best also has
downgraded the FSR to B- (Fair) from B+ (Good) and the Long-Term
ICR to “bb-” (Fair) from “bbb-” (Good) of NSFC’s wholly owned
subsidiary, Omega One Insurance Company, Inc. (Omega). In addition,
AM Best has downgraded the FSR to B (Fair) from B++ (Good) and the
Long-Term ICR to “bb” (Fair) from “bbb” (Good) of NSFC’s affiliated
life/health insurer, National Security Insurance Company (NSIC).
Concurrently, AM Best has maintained the under review with negative
implications status for these Credit Ratings (ratings). All
companies are domiciled in Elba, AL and are subsidiaries of VR
Insurance Holdings, Inc. (VR Holdings).
The ratings of NSFC reflect its balance sheet strength, which AM
Best assesses as adequate, as well as its marginal operating
performance, limited business profile and appropriate enterprise
risk management (ERM).
The rating downgrades for NSFC reflect its poor operating
results in 2023, due to an increase in the frequency and severity
of weather events, which in conjunction with the significant
operating losses at its sister company, NSIC, resulted in a
material loss of GAAP equity, an increase in financial leverage,
weak interest coverage measures and an overall decline in the
financial flexibility of VR Holdings. This resulted in a negative
holding company assessment and subsequent decline in NSFC’s overall
balance sheet strength assessment to adequate from strong.
The ratings of NSIC reflect its balance sheet strength, which AM
Best assesses as weak, as well as its adequate operating
performance, limited business profile and appropriate ERM.
The rating downgrades for NSIC reflects a downward revision in
its balance sheet strength assessment to weak from adequate
following a material decline in risk-adjusted capitalization and
absolute surplus in 2023 and through the first quarter of 2024, as
a result of a change in reserving practice for its multi-year
guaranteed annuity product line, which it started selling in early
2023. Although NSIC has taken actions to improve its risk-adjusted
capitalization, including significantly reducing annuity growth
beginning in the second quarter 2024, as well as looking for
additional ways of enhancing capital, a significant amount of
execution risk remains.
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, appropriate ERM and
ratings drag from its immediate parent NSFC, as well as the overall
decline in credit fundamentals of the consolidated group.
The rating outlooks for all entities are being maintained at
under review with negative implications status pending the close of
a previously announced transaction under which the group will be
acquired by PhenixFin, a publicly traded asset management company.
The under review with negative implications status reflects the
need for AM Best to fully assess the business strategy, financial
and operational impacts on the group as a result of the proposed
acquisition, as well as other capital raising initiatives. The
ratings will remain under review with negative implications status
until the transaction closes and AM Best has reviewed the group’s
strategy and capitalization plans.
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.
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