Oldwick, NJ -(BusinessWire)- AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Old Glory Insurance Company (Old Glory) (Tyler, TX).
The ratings reflect Old Glory’s balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The revised outlooks reflect Old Glory’s improving risk-adjusted capitalization, albeit mostly driven by capital contributions from its parent company, Heartland Security Insurance Group (Heartland), and improved loss and loss adjustment expense ratio over the past five years, which compares favorably with the average for the workers’ compensation (WC) composite. Offsetting some of these positive factors are the company’s limited size and scale of operations, operating as a mono-line WC writer with policyholder surplus of $9.8 million as of Sept. 30, 2018, and greater than 90% of its business generated in Oklahoma and Texas. This geographic concentration exposes the company to above average levels of regulatory, economic and event risk. The company also is challenged by its high expense ratio, which is double the average of the WC composite. The expense ratio is driven by significant levels of fixed costs. Despite these challenges, the company has reported net income in four of the past five calendar years and for the first nine months of 2018. AM Best expects that Heartland will continue to support Old Glory’s operations with capital contributions as needed, allowing the company to maintain risk-adjusted capitalization levels that continue to support the current rating level.
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