A.M. Best Affirms Ratings of National American Insurance Company and Chandler (USA) Inc.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of B+ (Good) and issuer credit rating (ICR) of "bbb-" of National American Insurance Company (NAICO). Concurrently, A.M. Best has affirmed the ICR of "bb-" and debt rating of "bb-" on $7 million 8.75% senior unsecured debentures, due 2014 of NAICO's parent, Chandler (USA) Inc. (Chandler) (both of Chandler, OK). The outlook for all ratings is stable.

NAICO offers various property/casualty insurance products through its two main marketing programs: standard lines and political subdivisions. Under the standard lines program, the company's insurance offerings include workers' compensation, auto liability and physical damage, general liability, products liability and umbrella liability insurance. The political subdivisions program offers property/casualty coverages to school districts in Oklahoma.

The ratings reflect NAICO's good risk-adjusted capitalization and improved operating performance, primarily driven by a reduction in the level of unfavorable loss reserve development reported in recent years. This improvement is due in part to management's corrective actions over the years, including significantly increasing rates, reducing exposures, improving risk selection and tightening policy terms and conditions.

These rating factors are offset by the continued variability of earnings and the magnitude of adverse loss reserve development reported on certain prior accident years, as well as NAICO's considerable dependence on reinsurance, despite increased retention levels in recent years. Although certain recent accident years have developed adversely, they have done so to a much lesser extent.

The ratings also consider the financial leverage and interest coverage of the organization on an enterprise basis. Consolidated financial leverage of debt plus preferred stock to total capital remains acceptable given the current rating levels, with interest coverage ratios also within acceptable parameters.

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

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, visit www.ambest.com.