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OLDWICK, N.J.--([ BUSINESS WIRE ])--A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of aa+a of National Lloyds Insurance Company (National Lloyds), as well as the FSR of A (Excellent) and ICR of aaa of American Summit Insurance Company (American Summit).

"Risk Management and the Rating Process for Insurance Companies"

Additionally, A.M. Best has affirmed the ICR of abbb+a of Hilltop Holdings Inc. (HTH) (headquartered in Dallas, TX) (NYSE: HTH). National Lloyds and American Summit are subsidiaries of HTH. The outlook for all ratings is stable. All companies are domiciled in Waco, TX, except where specified.

HTH currently operates as a public holding company that is endeavoring to make opportunistic acquisitions on an ongoing basis.

The ratings of National Lloyds reflect its solid risk-adjusted capitalization, generally favorable operating earnings in most years and local market expertise within its niche of the personal property insurance market. These positive rating factors are somewhat offset by National Lloydsa geographic concentration of risk primarily in the Texas marketplace, with susceptibility to frequent and severe weather-related events. This was evidenced during 2008 and 2011 when multiple storm losses negatively impacted underwriting results. However, National Lloyds continues to improve its underwriting guidelines in an effort to reduce inherent risk.

The ratings of American Summit recognize its solid risk-adjusted capitalization and generally favorable operating performance. These positive rating factors are somewhat offset by American Summitas geographic concentration of risk and limited product offerings as primarily a provider of insurance for the mobile home market. As a result, American Summitas underwriting performance is susceptible to the frequency and severity of localized storm activity. This was evidenced in 2010-2011 as a large hailstorm in Arizona negatively impacted underwriting results.

However, American Summit maintains a prudent catastrophe reinsurance program in conjunction with its affiliate company, National Lloyds, to mitigate losses associated with severe weather-related catastrophe events.

The ratings/outlook of both companies could be downgraded if operating performance falls materially short of A.M. Bestas expectations or if there is a material deterioration in capital strength as measured by Bestas Capital Adequacy Ratio (BCAR).

The methodology used in determining these ratings is Bestas Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestas rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: aRisk Management and the Rating Process for Insurance Companiesa; aUnderstanding BCAR for Property/Casualty Insurersa; and aCatastrophe Analysis in A.M. Best Ratings.a Bestas Credit Rating Methodology can be found at [ www.ambest.com/ratings/methodology ].

Founded in 1899, 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 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.