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A.M. Best Revises Outlook to Stable for National Telcom Corporation CONTACTS:
FOR IMMEDIATE RELEASE OLDWICK, N.J., Oct. 20, 2008—A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb” of National Telcom Corporation (NTC) (Vermont). NTC’s ratings are based on risk-adjusted capitalization, which supports its rating level and business specialization as a provider of insurance products to rural and independent telephone companies. NTC’s underwriting results have not had a beneficial impact on surplus for the last five years. Surplus increased substantially in 2006 and 2007 after declining in 2004 and 2005. NTC returned a small net income in 2007 due to an increase in investment income. Risk-adjusted capitalization and leverage measures have returned to normal levels compared to similarly rated peers. To offset capital and liquidity deficiencies, NTC sold a private stock offering that has raised a substantial amount of common equity. Prior to the stock offering, debt was issued that raised $2 million in second quarter 2003 through a subordinate capital note offer to shareholders/insureds. The notes can be called without penalty, and management plans to call the notes once the outstanding collateral held by NTC’s previous fronting carriers is released. Some of the proceeds from the stock offering were used to redeem some of the notes. Surplus increased significantly in 2007 primarily due to the private stock offering coupled with generation of a small net income. Also enhancing surplus growth was the lack of adverse activity in 2007 regarding the deferred tax asset increase, which decreased 2005 surplus. Rate increases instituted in 2002, 2003 and 2004 have produced a cumulative break-even operating result for the past four years. In addition to rate increases, NTC shifted its reinsurance program from an excess of loss contract to a quota share arrangement in 2005, which has reduced net loss exposure. A.M. Best remains the leading rating agency of captive insurers rating a wide variety of more than 200 captives in the United States and throughout the world. For current Best’s Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visitwww.ambest.com. ### |
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