By David Bull
May 21 - (The Insurer) - AM Best has downgraded the long-term issuer credit ratings of the members of Nodak Insurance Group from “a-plus” to “a” and affirmed the carrier’s A financial ratings reflecting the volatility of its operating results over the most recent five-year period.
In a statement the ratings agency said the volatility has been driven by weather-related losses and inflationary pressures on rising loss costs.
More recently there have also been adverse trends in the non-standard auto lines and prior-year reserve development related to these trends, AM Best added.
“Furthermore, the group suffered challenges with its commercial habitational lines of business over recent years through its previously owned company, Westminster American Insurance Company, which contributed to the volatile results of the Nodak pool,” it continued.
Parent company NI Holdings Inc sold Westminster American and removed it from the pool as of June 30 last year.
AM Best noted that the group recorded its highest combined ratio over the past five-year period of 118.5% in 2022.
“Although operating results have shown relative improvement since this time, Nodak has fallen out of alignment with companies that maintain a strong operating performance assessment,” said the ratings agency.
It added that the insurer’s five-year average pre-tax and total returns on revenue and equity fall short of the private passenger standard auto and homeowners industry composite, and that on a statutory basis, its combined ratio has been above break-even in four consecutive years.
“Management continues to address the volatility through sizable rate increases, underwriting revisions, and strategic non-renewals in underperforming lines of business, with a renewed focus on its core lines of business in the midwestern region of the United States.
“AM Best expects that these efforts will impact the group’s results favorably, affording Nodak the ability to perform comfortably in alignment with the adequate operating performance assessment level,” it concluded.