A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a+" of National Interstate Insurance Company and its affiliates, National Interstate Insurance Company of Hawaii, Inc., Triumphe Casualty Company and Vanliner Insurance Company (collectively referred to as National Interstate). Concurrently, A.M. Best has affirmed the ICR of "bbb+" of National Interstate Corporation (NATL) [NASDAQ:NATL]. Vanliner is domiciled in Fenton, MO. All other companies are headquartered in Richfield, OH. NATL is 51.4% owned by Great American Insurance Company, a wholly owned subsidiary of American Financial Group, Inc. The outlook for all ratings has been revised to stable from positive. The ratings reflect the group's excellent long-term operating performance, which outperforms the commercial automobile peer composite; strong risk-adjusted capitalization achieved through generally profitable underwriting results; and demonstrated expertise within its niche transportation market. In addition, the ratings acknowledge the group's experienced management team and conservative operating philosophy. The positive rating attributes are derived from management's focus on maintaining rate integrity, controlled claims handling and detailed segmentation of risks that are supported by effective technology resources. Additionally, National Interstate's focus on providing alternative risk transfer programs for the specialty transportation segment provides the group with a sustainable competitive advantage, particularly in terms of pricing, claims adjusting and loss control, which has resulted in high policyholder retention rates. The group's financial flexibility is also enhanced by its publicly traded immediate parent, NATL, which maintains minimal financial leverage and strong interest coverage. Partially offsetting these positive rating factors are the concentration of business within the passenger and truck transportation industries; the weakened underwriting performance due to a number of unrelated severe loss events during 2013; the 2014 results that were impacted by an increase in claims severity; and adverse reserve development occurring on the commercial auto line in 2014.
The change in outlooks reflects that underwriting and operating results in 2013 and 2014 were not in line with National Interstate's historical levels. Despite these concerns, the stable outlooks reflect A.M. Best's expectation that management's niche market knowledge and management initiatives focused on underwriting and reserving will restore underwriting profitability and improve earnings over the near term while maintaining a strong level of risk-adjusted capital that is supportive of the ratings.Positive rating actions could be taken if underwriting and operating results improve as anticipated and outperform other similarly rated commercial auto insurers while maintaining a strong level of risk-adjusted capitalization. Key factors that could trigger negative rating actions include a weakening in operating performance and/or risk-adjusted capitalization, particularly if the resulting performance trails that of similarly rated peers. The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. Key insurance criteria reports utilized: • Analyzing Insurance Holding Company Liquidity • Catastrophe Analysis in A.M. Best Ratings • Insurance Holding Company and Debt Ratings • Rating Members of Insurance Groups • Risk Management and the Rating Process for Insurance Companies • The Treatment of Terrorism Risk in the Rating Evaluation • Understanding BCAR for Property/Casualty Insurers • Understanding Universal BCAR This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center . 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 © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.