Best’s News & Research Service - July 01, 2015 03:00 PM (EDT)
A.M. Best Downgrades Ratings of Philmont Insurance Company
- July 01, 2015 03:00 PM (EDT)
Oldwick //BestWire// - A.M. Best has downgraded the financial strength rating to B (Fair) from B++ (Good) and the issuer credit rating to "bb+" from "bbb+" of Philmont Insurance Company (Philmont) (Burlington, VT). The outlook for both ratings is stable.
The downgrade reflects an increase in losses in 2014, which resulted in a significant drop in risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), to a level that no longer supported the prior rating.
The current ratings and outlook reflect Philmont's adequate capitalization and conservative operating strategy. The ratings also consider the company's critical role and favorable profile as part of the Toll Brothers, Inc. (Toll Brothers) [NYSE: TOL] organization, as well as its strong operating performance during the past five years, providing insurance coverage to various projects and subsidiaries of Toll Brothers for certain liability risks.
Partially offsetting these positive rating factors are Philmont's volatility of operating results and relatively large loss reserves. Nevertheless, A.M. Best recognizes the strong liquidity position of Philmont and the substantial financial resources of the Toll Brothers organization.
A.M. Best views Philmont's management and corporate strategy as strengthening factors for the ratings. In addition, A.M. Best views the company's enterprise risk management practices as strong given their impact on the conservative risk culture, defined risk controls and optimizing Philmont's capital and surplus. Other rating considerations include, but are not limited to, the diversification in lines of business and geography. The support and commitment of the parent and the captive's mission also have been considered positive factors.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive .
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