A.M. Best Affirms Ratings of National General Holdings Corp. and Its Subsidiaries

  A.M. Best Affirms Ratings of National General Holdings Corp. and Its
  Subsidiaries

Business Wire

OLDWICK, N.J. -- May 30, 2014

A.M. Best has affirmed the financial strength rating (FSR) of A- (Excellent)
and issuer credit rating (ICR) of “a-”of the property/casualty subsidiaries of
National General Holdings Corp. (National General Holdings) [NASDAQ: NGHC]
(headquartered in New York), also known as National General Group (National
General). Concurrently, A.M. Best has affirmed the ICR and senior debt ratings
of “bbb-” of National General Holdings. The outlook for all ratings is stable.
(See below for a detail list of the companies and ratings.)

These rating actions take into consideration the completed equity offerings of
National General Holdings in June 2013 and February 2014, and their beneficial
impact on overall financial flexibility, liquidity and improved statutory
risk-adjusted capitalization of National General. Gross proceeds from the
offerings were approximately $420 million, of which approximately $225 million
will be contributed to National General. With the contribution, National
General intends to bolster statutory surplus to support the additional premium
volumes retained as a result of the run-off of its third-party quota share
treaty, effective Aug. 1, 2013, as well as assumed premiums from the Tower
Personal Lines Cut-Through Reinsurance Agreement entered into in the first
quarter. Additionally, the affirmation of National General’s ratings reflect
its solid risk-adjusted capitalization, the historically profitable operating
performance of the company’s personal lines, a well-established market
presence and an increase in efficiency and pricing sophistication from a
recently completed system enhancement, which will enable the group to process
the increased premium volume.

These positive rating factors are partially offset by declining operating
income in recent years, primarily driven by decreasing underwriting results
due to increased loss frequency, loss reserve strengthening and
weather-related losses. In addition, the execution risk on business assumed
through the aforementioned Tower transaction, including the increase in the
group’s property exposures, could result in increased variability in results,
driven by the vagaries of weather and catastrophe events. However, this risk
is somewhat mitigated through a strong reinsurance program.

Key rating factors that may lead to future positive rating actions include the
group outperforming its projections and peers over an extended period of time.
However, negative rating actions could result if the group’s operating
performance falls short of expectations or its risk-adjusted capitalization
declines to a level that no longer supports the ratings of its members.

The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for the
following property/casualty subsidiaries of National General Holdings Corp.:

  *New South Insurance Company
  *National General Assurance Company
  *Integon National Insurance Company
  *Integon Indemnity Corporation
  *Integon General Insurance Corporation
  *MIC General Insurance Corporation
  *National General Insurance Company
  *National Health Insurance Company
  *Integon Casualty Insurance Company
  *Integon Preferred Insurance Company
  *National General Insurance Online Inc.
  *Personal Express Insurance Company

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.

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 © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best
Brian O’Larte
Senior Financial Analyst
(908) 439-2200, ext. 5138
brian.olarte@ambest.com
or
Michael Lagomarsino, CFA
Assistant Vice President
(908) 439-2200, ext. 5810
michael.lagomarsino@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com
 
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