OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “a+” (Excellent) of Westminster American Insurance Company (WAIC) (headquartered in Owings Mills, MD). Concurrently, AM Best has maintained the under review with negative implications status for these Credit Ratings (ratings).
The ratings reflect WAIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
WAIC’s ratings were downgraded primarily as a result of its removal from the Nodak Insurance Group (Nodak) pool. In 2020, WAIC was acquired by NI Holdings, Inc. (NODK: Nasdaq) and subsequently added as a member of the Nodak group via a pooling agreement. The acquisition gave WAIC access to financial efficiencies provided through a larger-scaled organization. However, effective June 30, 2024, WAIC was sold by NI Holdings, Inc. back to its original owners, and has since been removed as a member of Nodak.
Consequently, WAIC’s business profile assessment was lowered to limited from neutral. The company is concentrated from a product standpoint predominately writing commercial property risks in several mid-Atlantic states, which leaves overall results vulnerable to potentially frequent and severe weather-related events. Further, given variability in its operating results over the most recent five-year period, the operating performance assessment was lowered to adequate from strong. WAIC’s key operating return metrics (combined/operating ratios, pre-tax and total returns) over the past five-years largely reflect its portion of the Nodak pool. Accordingly, its direct pure loss ratios are more indicative of its performance outside of the pool and have been climbing over that same period. The balance sheet strength is still considered to be very strong, given the company’s overall level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), its conservative investment philosophy and appropriate reinsurance protection. Lastly, AM Best considers the company’s ERM to be appropriate with risk management capabilities commensurate with its risk profile.
The ratings will remain under review with negative implications until AM Best can assess WAIC’s prospective financial and operational plans under new ownership. The company is expected to begin reporting its own results apart from the pool in the third quarter of 2024. Should WAIC’s future results and/or business plan on a standalone basis, independent of the pool, not be consistent with its current rating, the negative implications could result in additional downgrades.
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