Oldwick, NJ -(BusinessWire)- AM Best has assigned a Preliminary Credit Assessment (PCA) to Omaha National Insurance Company (ONIC) (Omaha, NE) with a Financial Strength Assessment of A- pca (Excellent) and a Long-Term Issuer Credit Assessment of “a-” pca (Excellent). The outlook assigned to these PCAs is stable.
The PCAs reflect ONIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The very strong balance sheet assessment reflects ONIC’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), on a pro forma basis for an expected $35 million capital contribution from the company’s intermediate parent, Omaha National Group, Inc. (ONG), following its August 2021 Series B convertible preferred stock issuance, and the expected issuance of a $20 million external surplus note. While ONG is capitalized primarily with convertible preferred stock, which results in high financial leverage per AM Best’s guidelines, the PCAs recognize the equity-like characteristics of ONG’s convertible preferred stock, the parent’s adequate liquidity position and ongoing capital support from investors.
AM Best assesses the company’s operating performance as adequate based on ONIC’s historical results since inception in October 2017 and its well-defined business plan, and considers a level of execution risk associated with the company’s plan to start writing business produced by its affiliated managing general agent, Omaha National Underwriters, LLC (ONU), on a direct basis. ONIC assumes all of its premium through a quota-share agreement with an unaffiliated fronting carrier, Preferred Professional Insurance Company (PPIC). The business is produced by ONU, which manages all aspects of the policies sold through PPIC. AM Best views the company’s business profile as limited as ONIC is a mono-line writer of workers’ compensation insurance with a geographic concentration in California. ONIC’s ERM capabilities benefit from rigorous claims oversight, established risk tolerance levels and strict underwriting guidelines.
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