AM Best Affirms Credit Ratings of NiSource Insurance Corporation, Inc.

AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of NiSource Insurance Corporation, Inc. (NICI) (Salt Lake City, UT). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect NICI’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

NICI maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). A conservative reserving philosophy is evident through the company’s reported favorable reserves development in each of the past 10 years. The balance sheet assessment also considers the company’s ample liquidity measures, and maintaining low underwriting leverage, in addition to having no debt.

The strong operating performance assessment is supported by favorable combined and operating ratios that outperforms AM Best’s commercial casualty composite. NICI’s strong operational results reflect loss ratios trending favorably, and a low underwriting expense structure that stems from the inherent benefits of being a single-parent captive for NiSource Inc. (NiSource). Through its niche captive orientation, risk management expertise and conservative underwriting criteria, NICI has generated favorable results at levels generally equal to or better than its industry peers, organically growing its surplus by three-fold in the past 10 years.

NICI is a single-parent captive insurer wholly owned by NiSource, providing all-risk property, workers’ compensation, excess general and automobile liability, medical stop-loss, long-term disability, group life insurance and punitive damage coverage for the parent and its affiliates. AM Best has taken a balanced view of NICI’s overall business profile, which albeit limited in scope, maintains inherent advantages as a single-parent captive with immediate access to business and resources along with the broader financial wherewithal of its ultimate parent. NICI plays a critical role in NiSource’s overall ERM framework, supporting its objectives through insuring key risks of the parent, ultimately supporting NiSource’s financing needs.

The stable outlooks for NICI reflect the company’s sustained profitability, adherence to maintaining capital at the appropriate risk-adjusted levels and its measured and prudent approach in insuring its parent’s exposure. Positive rating action may occur due to a sustained trend of improvement in the company’s overall balance sheet strength that supports a higher assessment level. Conversely, negative rating actions could occur from a decline in the company’s operating performance, an increase in underwriting leverage or an outsized loss event that triggers a sudden decline in risk-adjust capitalization. In addition, negative rating action could occur due to financial issues resulting in rating pressure on the ultimate parent that could impact NiSource’s ratings.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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