AM Best affirms NiSource ratings
AM Best has affirmed the financial strength rating of A and the long-term issuer credit rating of “a” of NiSource Insurance Corporation. The outlook of these ratings is stable.
The ratings reflect NICI’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The company’s ratings benefit from the implicit and explicit support it receives as a strategic component of its ultimate parent, NiSource, Inc.’s (NiSource) ERM.
NICI maintains the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet evaluation also considers the company’s strong liquidity position, prudent reserving approach and disciplined investment strategy, as well as the financial flexibility afforded by the parent, NiSource. NICI experienced consistently favourable reserve development on a calendar-year basis during the previous 10-year period. These attributes are offset by the high retention to surplus ratio, which is reflected in the limit the captive offers the parent.
The company’s strong operating performance assessment is supported by favourable combined and operating ratios that exceed those of AM Best’s commercial casualty composite. Its solid results are driven by favourable loss ratios and a low underwriting expense structure inherent to single-parent captive companies. Leveraging its niche captive focus, risk management expertise and disciplined underwriting approach, NICI has consistently produced results that are generally on par with or outperform those of its industry peers, the rating agency said.
NICI is a single-parent captive insurer wholly owned by NiSource, providing all-risk property, workers’ compensation, excess general and automobile liability, medical stop-loss, long-term disability, group life insurance and punitive damage coverage for the parent and its affiliates. AM Best has taken a balanced view of NICI’s overall business profile, which albeit limited in scope, maintains inherent advantages as a single-parent captive with immediate access to business and resources along with the broader financial wherewithal of its ultimate parent. NICI plays a critical role in NiSource’s overall ERM framework, supporting the parent’s objectives through insuring key risks and ultimately supporting NiSource’s financing needs.
The stable outlooks reflect AM Best’s expectation that NICI will maintain its overall balance sheet assessment, supported by risk-adjusted capitalisation at the strongest level, as measured by BCAR, while continuing to maintain strong operating performance driven by sustainable operating profits and organic surplus growth insuring its parent’s insurance needs/exposures. The outlooks also reflect AM Best’s expectation that the ability and willingness of NiSource, to support its captive will not change.
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