National Interstate & Units' Ratings Unchanged by A.M. Best - Analyst Blog

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A.M. Best reiterated the issuer credit rating (ICR) of "bbb+" of National Interstate Corporation NATL . Concurrently, the rating agency maintained the financial strength rating (FSR) of A (Excellent) and the ICR of "a+" of the unit National Interstate Insurance Company and its affiliates - National Interstate Insurance Company of Hawaii, Inc.,Triumphe Casualty Company and Vanliner Insurance Company. The ratings carry a stable outlook, revised from a positive outlook.

The ratings' affirmations came on the back of sustained solid operating performance which outpaced the commercial automobile peer group; sturdy risk-adjusted capitalization driven by strong underwriting profits and expertise within its niche transportation market. The results benefitted from focus on rate integrity, efficient claims management and effectively segmenting risks.

Moreover, National Interstate Corp. enjoys a competitive advantage due to its focus on providing alternative risk transfer programs for the specialty transportation segment. This in turn helps the company to experience high policyholder retention rates riding on favorable pricing, claims adjustments and loss control. Financial support rendered by the parent company also helps in rating affirmations.

However, business limited within the passenger and truck transportation industries, poor underwriting performance due to a number of unrelated severe loss events during 2013, escalated claims severity and unfavorable reserve development in the commercial auto line in 2014 weighed on the positives.

A.M. best stated that National Interstate Corp. may witnesses a rating upgrade if its underwriting and operating results improve or if it outperforms its peers while maintains a sturdy risk-adjusted capitalization. However, negative rating actions may follow if operational results deteriorate or risk-adjusted capitalization erodes.

Rating affirmations or upgrades from credit rating agencies play an important part in retaining investor confidence in the stock as well as in maintaining credit worthiness in the market. On the other hand, rating downgrades damage business, apart from increasing costs of future debt issuances. We believe that strong ratings will help National Interstate retain investor confidence and help it in writing more businesses going forward.

National Interstate Corp. carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked property and casualty insurers are AmTrustFinancial Services, Inc. AFSI , Allied World Assurance Company Holdings AG AWH and Arch Capital Group Ltd. ACGL . All these stocks sport a Zacks Rank #1 (Strong Buy).

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NATL INTERST CP (NATL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: ACGL ,

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