OLDWICK: AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb+” from “bb” and affirmed the Financial Strength Rating (FSR) of B (Fair) of Nations Insurance Company (Nations) (Cerritos, CA).

The outlook of the Long-Term ICR has been revised to stable from positive, while the outlook of the FSR remains stable.

The Credit Ratings reflect Nations’ balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.

The upgrade of the Long-Term ICR is based on Nations’ increased balance sheet strength in recent years, driven by improved risk-adjusted capitalization, underwriting leverage, liquidity measures and loss reserve development trends. Nations implemented a 50% quota share reinsurance contract effective Jan. 1, 2017, which reduced its net underwriting leverage significantly.

This quota share reinsurance was increased to 60% effective Jan. 1, 2018. Furthermore, Nations has implemented rate increases in recent years, which have improved its underwriting performance, and increased investment allocation to long-term bonds, which has improved its investment income, both leading to improved surplus growth.