A.M. Best Affirms Credit Ratings of National Lloyds Insurance Company and American Summit Insurance Company

A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of National Lloyds Insurance Company (National Lloyds). Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of American Summit Insurance Company (American Summit), National Lloyd’s affiliate. The outlook of these Credit Ratings (ratings) is stable. National Lloyds and American Summit are domiciled in Waco, TX and are subsidiaries of Hilltop Holdings Inc. (NYSE:HTH), a financial holding company based in TX.

The ratings of National Lloyds recognize its sound risk-adjusted capitalization, solid liquidity and management’s expertise within its niche market of property insurance. Additionally, the ratings reflect National Lloyds’ improved underwriting and operating performance in recent years, primarily driven by management’s corrective actions including rate increases, non-renewal of unprofitable business, increased inspections and strict agency management. The company benefits from the financial flexibility of Hilltop Holdings, Inc., its ultimate parent, which has provided explicit support in the form of a capital contribution to offset surplus loss in 2012.

Partially offsetting these positive rating factors are the company’s volatile underwriting results in the earlier part of the most recent five-year period, which were driven by a variety of frequent and severe weather-related events, above-average expense structure and geographic concentration risk. Furthermore, National Lloyds has a product and geographic concentration of risk since it provides homeowner insurance, with the majority of the business in Texas.

The ratings of American Summit reflect its strong risk-adjusted capitalization, generally profitable operating performance that was generated by steady investment income, other income and capital gains over the past five years. Additionally, the company’s ratings recognize its stable loss reserving trends, conservative investment philosophy and excellent liquidity measures.

These positive rating factors are offset partially by American Summit’s varying underwriting performance that resulted in underwriting losses in one of the previous five years. The company’s underwriting loss was driven by increased weather-related events and elevated losses from an affiliated quota share reinsurance agreement with National Lloyds. American Summit maintains a prudent catastrophe reinsurance program in conjunction with National Lloyds to mitigate losses associated with severe weather-related catastrophe events. American Summit’s product offering and geographic concentration are somewhat limited, as it is primarily an insurance provider for the mobile home market, with the majority of the business conducted in Arizona.

This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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