Best’s News & Research Service - October 23, 2014 02:54 PM (EDT)
A.M. Best Affirms the Ratings of Heritage Indemnity Company
- October 23, 2014 02:54 PM (EDT)
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of "a" of Heritage Indemnity Company (Heritage) (Irvine, CA). The outlook for both ratings remains stable.
The ratings reflect Heritage's solid capital position, favorable operating results and geographic diversification. Heritage has a history of consistent operating profitability, as reflected in its pre-tax returns on revenue and equity, which have been favorable for five consecutive years. In addition, the company's combined and operating ratios have been below break-even with minor variation over the last five years, which is indicative of management's conservative operating strategy. The company's operations are enhanced by the financial flexibility of its ultimate parent, Wells Fargo & Company (WFC).
Partially offsetting these positive rating factors are the company's limited profile and the low interest rate environment. Heritage insures one main product with variations of vehicle service contracts offered through a network of independent agents, financial institutions and Wells Fargo Dealer Services regional business centers. Recently, the company's overall risk-adjusted capitalization declined due to an extraordinary dividend of $60 million paid to WFC. Despite the dividend, the company remains more than adequately capitalized for its current rating level.
Negative rating actions may occur if poor underwriting results and operating performance were to develop or if risk-adjusted capitalization were to deteriorate. Positive rating actions may be considered if the company were to establish itself as a dominate player in its specialty vehicle service contract line of business while maintaining its financial strength.
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.
Key insurance criteria reports utilized:
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.