AM Best Assigns Credit Ratings to Omaha National Casualty Company; Affirms Credit Ratings of Omaha National Insurance Company
AUGUST 20, 2024 09:27 AM (EDT)
AM Best has assigned a Financial Strength Rating (FSR) of A- (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) to Omaha National Casualty Company (ONCC). The outlook assigned to these Credit Ratings (ratings) is stable. Additionally, AM Best has affirmed the FSR of A- (Excellent) and a Long-Term ICR of “a-” (Excellent) of Omaha National Insurance Company (ONIC). The outlook of these ratings is stable. These companies collectively are referred to as Omaha National Group (ONG) and are domiciled in Omaha, NE.
The ratings of ONCC reflect its role as a member of ONG and the explicit support provided to ONCC through the implementation of an intercompany pooling agreement with ONIC, the lead company of ONG. ONG’s initial intentions are for ONCC to write workers’ compensation policies emanating from California, which consist of an existing book of business previously written through a fronting insurer.
The ratings reflect ONG’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.
The very strong balance sheet assessment reflects ONG’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which includes a $10 million capital contribution from the group’s intermediate parent, Omaha National Group, Inc. (ONG Inc.), in March 2024, following ONG Inc.’s issuance of $20 million of Series B-1 convertible preferred stock. ONG Inc. also made a $20 million capital contribution to the group in April 2022 funded by ONG Inc.’s issuance of $20 million of senior unsecured debt, and a $35 million capital contribution to the group in December 2021, following ONG Inc.’s August 2021 Series B convertible preferred stock issuance. While ONG is capitalized primarily with convertible preferred stock and debt, which results in high financial leverage per AM Best’s guidelines, the balance sheet assessment recognizes the equity-like characteristics of ONG’s convertible preferred stock, the parent’s adequate liquidity position and ongoing capital support from several investors.
AM Best assesses the group’s operating performance as adequate based on its historical results and well-defined business plan, although there is some execution risk associated with the group’s plan to write the majority of business produced by its affiliated managing general agent, Omaha National Underwriters, LLC (ONU), on a direct basis over the near term and expand its geographic presence. There is also potential execution risk if the workers’ compensation business underwritten by ONU does not perform as expected. In recent years, the group has assumed the majority of its premium through quota-share agreements with unaffiliated fronting carriers. It is expected that over time the ability to write workers’ compensation on a direct basis will improve operating performance. AM Best views the group’s business profile as limited as it is a monoline writer of workers’ compensation insurance with a geographic concentration in California. The group’s ERM capabilities benefit from rigorous claims oversight, established risk tolerance levels and strict underwriting guidelines.
Contact:
Robert Valenta, CPCU
Senior Financial Analyst
robert.valenta@ambest.com
Rosemarie Mirabella
Director
rosemarie.mirabella@ambest.com
Christopher Sharkey
Associate Director, Public Relations
christopher.sharkey@ambest.com
Al Slavin
Senior Public Relations Specialist
al.slavin@ambest.com