Back to top

Analyst Blog

Ratings agency A.M. Best Co. demoted the credit rating of National Lloyds Insurance Co. (NLIC) – a property-casualty (P&C) wing of Hilltop Holdings Inc. (HTH - Analyst Report) – by a notch. The rating was lowered on the backdrop of weak operating performance over the past several years.

Accordingly, the ratings agency downgraded the issuer credit rating (ICR) of NLIC to “a” from “a+”. While NLIC maintains its financial adequacy with a strong risk-based capitalization, A.M. Best remains concerned over its weak underwriting performance that has been delivering losses. Particularly, increased catastrophe losses in Texas, NLIC’s primary operating area, over the past few years have escalated the claims ratio, thereby affecting the earnings.

Nevertheless, NLIC is taking proactive steps through a conservative investment strategy and firm grasp on the local P&C insurance market. These steps are aiding the company to tighten policy coverage, eliminate loss-making products and increase rates on existing products. Such efforts are expected to improve underwriting operations as well as overall profitability in the future.

Meanwhile, the ratings agency pulled out the ICR of “bbb+” that was assigned on Hilltop in Apr 2010 and was affirmed last year. This was backed by Hilltop’s recent acquisition of Plains Capital Corp., following which Hilltop became a bank holding company, which curbed the business contribution from its P&C insurance operations.

However, A.M. Best affirmed the financial strength rating (FSR) at “A” on both NLIC and American Summit Insurance Co. (ASIC) with an overall stable outlook. The ratings agency also reiterated the ICR of “a” on ASIC. Both ASIC and NLIC are the affiliates of Hilltop’s primary subsidiary NLASCO Inc., through which the company conducts its P&C operations in the U.S.

The ratings agency remains confident of ASIC’s right-sized product basket that helps it retain a strong position in the mobile home insurance market, primarily based out of Ariz. While catastrophe losses are a consistent risk, prudent management entails cautious reinsurance programs that help in mitigating a majority of the losses for this division of Hilltop. Going ahead, any improvement or deceleration from the current level should direct A.M. Best’s revisions in the ratings of Hilltop and its subsidiaries.

Apart from Hilltop, other stocks that are outperforming in the insurance sector include Progressive Corp. (PGR - Analyst Report), XL Group Plc (XL - Analyst Report) and Navigators Group Inc. (NAVG - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.00 +3.09%
SANCHEZ ENE… SN 34.18 +2.67%
THE PANTRY… PTRY 21.02 +2.09%
INTEL CP INTC 35.15 +1.88%
CLAYTON WIL… CWEI 117.30 +1.78%