Dallas National President Takes Issue With A.M. Best Downgrade

The head of property and casualty insurance carrier Dallas National Insurance Co. has responded to the recent downgrade of the company’s ratings by A.M. Best, stating that the company is fiscally conservative and adequately reserved.

Best recently downgraded Dallas National’s financial strength rating to B (Fair) from B++ (Good) and issuer credit rating to “bb” from “bbb,” and assigned a negative outlook for both.

Best said the rating downgrades reflect Dallas National’s current and projected vulnerable level of risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR), which is driven by rapid growth in premium and reserves that is well in excess of management’s projections previously shared with A.M. Best.

In an announcement released by the company, Dallas National President and CEO Chris Nehls said the company understands Best’s concern that “our ability to grow the business beyond our own projections and definitely beyond that of a traditional insurance company requires this further reduction.”

However, Nehls said, “the growth at Dallas National has resulted primarily from the movement of premium between our affiliated high-deductible worker’s compensation programs and the newly developed pay as you go (‘paygo’) program.”

He said the company would continue to work with A.M. Best to help the ratings agency understand Dallas National’s business model and strategy.

Additionally, Nehls said, the company is committed to remaining strong and to improving its underwriting and claims processes.

“We will continue to maintain strong regulatory compliance. We will continue to partner with reinsurers who are rated A or better by A.M. Best,” Nehls said. “And we will continue to grow the company profitably.”

Topics AM Best