OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” of National Fire and Casualty Company (NFC) (Chicago, IL). The outlook of the FSR is stable.
These Credit Ratings (ratings) reflect NFC’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The revised Long-Term ICR outlook to negative from stable was driven by surplus erosion from increased underwriting losses and equity market volatility. The balance sheet is further pressured from its limited scale, elevated common stock leverage and high percentage of lower quality bonds relative to the composite. Despite the deterioration, NFC continues to maintain the strongest level of risk adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). NFC’s marginal operating performance reflects deteriorating trends in underwriting and operating performance, partially driven by an uptick in loss severity. The company’s business profile is considered limited, as it operates within a niche market in Illinois and Indiana. Its ERM practices are viewed as appropriate for the size and scope of operations.
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