A.M. Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of aa- of California Insurance Company (Foster City, CA), Continental Indemnity Company (Cedar Rapids, IA), Illinois Insurance Company (Cedar Rapids, IA), Texas Insurance Company (Dallas, TX) and Pennsylvania Insurance Company (Cedar Rapids, IA). All companies are collectively referred to as North American Casualty Group (NAC). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect NACs balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
NACs risk-adjusted capitalization, as measured by Bests Capital Adequacy Ratio (BCAR), is categorized as strongest and A.M. Best expects it to remain at a similar level in prospective years. Balance sheet strength also benefits from the companys strong liquidity profile, conservative investment strategy, disciplined reserving approach and good financial flexibility provided by its publicly traded ultimate parent, Berkshire Hathaway Inc. [NYSE: BRK.A and BRK.B].
NAC has a track record of strong operating earnings, underpinned by its robust underwriting performance and demonstrated by a five-year average return on equity ratio of 18% (2013-2017). Due to the low interest rate environment and NACs conservative investment strategy, investment returns remain marginal. A.M. Best expects the company to continue to achieve strong earnings going forward, in line with its past performance.
NACs business profile remains concentrated in the workers compensation line of business, which accounted for 98% of its gross written premiums (GWP) in 2017. Although management has achieved measured growth in other states, California remains the companys primary market (i.e., 46% of 2017 GWP). Following the settlement of a regulatory action by the California Department of Insurance in 2017, NAC has put its EquityComp program into run-off. A.M. Best expects the companys top-line to reduce in 2018, due to the combined effect of the run-off action and persistent challenging competitive conditions in the market. NACs risk management capabilities are appropriately aligned with its risk profile.
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This press release relates to Credit Ratings that have been published on A.M. Bests website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and A.M. Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and A.M. Best Rating Action Press Releases.
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Copyright 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
Guilherme (Guy) Monteiro Simoes, +1 908 439
2200, ext. 5301
Senior Financial Analyst
DeRose, +44 20 7397 0281
Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations