A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a+” of National Interstate Group and its members. Concurrently, A.M. Best has affirmed the ICR of “bbb+” of the group’s publicly traded parent, National Interstate Corporation (National Interstate) (both domiciled in Richfield, OH) [NASDAQ: NATL]. The outlook for all ratings is stable. (See below for a detailed list of the companies.)

These rating actions reflect the group’s very strong operating results, excellent risk-adjusted capitalization, its leadership position in its core niche passenger transportation market and diverse product structure. The ratings also reflect the additional financial flexibility provided by National Interstate, which maintains modest financial leverage and very strong interest coverage ratios.

These positive rating attributes are somewhat offset by the group’s business concentration in the passenger and truck transportation industries and the inherent risk in new business, particularly growth in the group’s alternative risk transfer programs, which now comprise approximately 56% of its gross written premiums, as well as the risks associated with the group’s 2010 acquisition of Vanliner Group, Inc.

The outlook recognizes A.M. Best’s expectation that the group’s diverse product structure and specialty focus will continue to generate positive earnings while maintaining solid risk-adjusted capital over the near term, despite increasing competitive pressures, challenging macro economic conditions and the integration risks associated with the Vanliner Group, Inc. acquisition.

The FSR of A (Excellent) and ICRs of “a+” have been affirmed for National Interstate Group and its following members:
  • National Interstate Insurance Company
  • National Interstate Insurance Company of Hawaii, Inc
  • Triumphe Casualty Company
  • Vanliner Insurance Company

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition , which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “ Rating Members of Insurance Groups”; “The Treatment of Terrorism Risk in the Rating Evaluation”; and “ A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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