AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Utah-domiciled NiSource Insurance Corporation (NICI).
NICI is a single-parent captive wholly owned by utilities company NiSource Inc and the outlook for the ratings is stable
The company serves approximately 3.5m natural gas customers and 500,000 electric customers across six US states.
The captive provides all-risk property, workers’ compensation, excess general and automobile liability, medical stop-loss, long-term disability and group life insurance for the parent and its affiliates.
The ratings reflect NICI’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The combined and operating ratios have outperformed the industry averages, due to a low underwriting expense structure and loss ratios trending favourably.
Since inception, NICI has generated profitability at levels generally equal to or better than its industry peers.
Over the years, retained earnings have boosted NICI’s balance sheet strength with future earnings expected to produce more of the same.
The captive’s balance sheet strength assessment of very strong reflects the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as the company’s strong liquidity measures, conservative investment philosophy and history of favourable reserve development.
AM Best said it 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”.
The ratings agency also noted that downward rating pressure could result from a decline in the company’s operating performance, an increase in underwriting leverage, or an outsized loss event that triggers a sudden decline in risk-adjusted capitalisation.
In addition, rating pressure could occur if there are any sudden and material changes in the financial and credit profile of the parent.