AM Best Removes From Under Review with Developing Implications, Affirms Credit Ratings of VR Insurance Holdings, Inc.’s Insurance Subsidiaries

AM Best has removed the under review with developing implications and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” (Good) of National Security Fire and Casualty Company (NSFC). AM Best also has removed from under review with developing implications and affirmed the FSR of B+ (Good) and the Long-Term ICR of “bbb-” (Good) of NSFC’s wholly owned subsidiary, Omega One Insurance Company, Inc. (Omega). The outlook assigned to these Credit Ratings (ratings) is stable. In addition, AM Best has removed from under review with developing implications and affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb” (Good) of NSFC’s affiliated life/health insurer, National Security Insurance Company (NSIC). The outlook assigned to these ratings is negative.

Concurrently, AM Best has withdrawn the Long-Term ICR of “bb” (Fair) of The National Security Group, Inc. (NSEC) (Wilmington, DE), which was the group’s publicly traded parent company. At the time of the withdrawal, these ratings were under review with developing implications. NSEC has been taken private as a result of its acquisition (along with its operating subsidiaries) by VR Insurance Holdings, Inc., which is a private holding company formed by a group of investors. All companies are domiciled in Elba, AL, unless otherwise specified.

The ratings of NSFC reflect its overall balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings of Omega reflect its balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, very limited business profile and appropriate ERM. The stable outlook on both of the property/casualty entities reflects recent risk reduction efforts by NSFC to reduce its coastal footprint in the Louisiana market; this is expected to reduce its catastrophe risk and continue its improved underwriting performance.

The ratings of NSIC reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate ERM. NSIC is expected to enhance and diversify its business profile as the company enters the multi-year guaranteed annuity (MYGA) market, which is key to the new owners or company’s business strategy. However, the negative outlook reflects quality of capital concerns associated with NSIC providing partial financing of VR Insurance Holdings, Inc.'s acquisition. This stems from the issuance of a note that is a large percentage of NSIC’s existing capital base, as well as an existing surplus note with NSFC to support its capital following material catastrophe losses in 2020.

Going forward, AM Best expects the group to enhance its ERM capabilities, particularly within NSIC, Enhancing the group’s overall operating profitability should improve diversification of earnings while maintaining appropriate levels of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and support business growth. Specific to investment risk and asset liability matching (ALM), AM Best expects NSIC to maintain an appropriate ALM match along with sufficient liquidity resources and prudent investment allocations as it enters the MYGA market. Additionally, although the holding company is private, AM Best expects financial and operating leverage ratios to be maintained at a level commensurate with the group’s ratings, along with appropriate interest coverage ratios.

This press release relates to Credit Ratings that have been published on AM Best’s 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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