AM Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings to “bbb+” (Good) from “a-” (Excellent) of the insurers that operate under an intercompany pooling agreement and are collectively referred to as NLC Insurance Companies Pool (NLC).
The NLC pool member carriers are New London County Mutual Insurance Co., Hingham Mutual Fire Insurance Co., Thames Insurance Co., Inc. and Danbury Insurance Co. All companies are headquartered in Norwich, Conn.
The outlook of the FSR has been revised to stable from negative, while the outlook of the long-term ICR is negative.
AM Best said the credit ratings reflect NLC’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
According to AM Best analysts, the rating downgrades are based on “deteriorating trends in NLC’s operating performance in recent years, largely reflective of an increased frequency and severity of weather-related events and adverse development in its liability and assumed property lines of business.” Additionally, increased expenses associated with a new policy administration system and elevated commission costs, which AM Best said are typical of New England carriers, contribute to NLC’s high underwriting expense ratio.
AM Best said the negative outlook of the long-term ICR reflects the “ongoing deterioration” in NLC’s operating performance. “Without sustained improvement, this could lead to a downward revision in the overall assessment of balance sheet strength and/or business profile in the near to intermediate term,” AM Best stated.
According to AM Best, NLC maintains strong overall balance sheet strength, “marginally supported by very strong risk-adjusted capitalization,” as measured by Best’s Capital Adequacy Ratio (BCAR), which is offset somewhat by limited surplus growth.
AM Best said it views NLC’s business profile as neutral, as its geographic spread of risk is concentrated strategically in Connecticut, Massachusetts and Rhode Island, and distributed through a strong independent agency network.
However, the continued deterioration in operating performance due in large part to increased underwriting volatility has placed greater weight on NLC’s geographic and product concentration in the evaluation of its business profile assessment.
AM Best said it views NLC’s ERM framework, which includes a committee led by the chief executive officer, Jill Eaton, and consists of other senior managers that collaborate in identifying risks and developing appropriate risk mitigation procedures, as appropriate for its risk profile.
According to its website, NLC has written premiums of about $85,000,000 and employs approximately 90 people. Homeowners insurance accounts for about 50% of the company’s writings. Other products offered include personal automobile, dwelling fire, commercial package policies and personal and commercial umbrella policies.
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