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FOR IMMEDIATE RELEASE
OLDWICK - NOVEMBER 19, 2014 09:02 AM (EST)
A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Cedar Court Indemnity Company (Cedar) (Burlington, VT). The outlook for both ratings is stable.
The ratings reflect Cedar's strong capitalization and conservative operating strategy. The ratings also consider the company's critical role and favorable profile as part of Honeywell International Inc. (Honeywell) [NYSE: HON], as well as its strong operating performance during the past five years, providing insurance coverage to various subsidiaries of Honeywell for certain liability risks.
Partially offsetting these positive rating factors are Cedar's relatively large reserves and incurred, but not reported reserves. Nevertheless, A.M. Best recognizes the strong liquidity position of Cedar and the substantial financial resources of Honeywell.
A.M. Best views Cedar's management and corporate strategy as strengthening the ratings, given its conservative underwriting, operational goals and transparency. A.M. Best views the company's enterprise risk management practices as strong given the impact on its conservative risk culture, defined risk controls and capital and surplus position. Other rating factors that A.M. Best considered include, but are not limited to, the diversification in Cedar's lines of business and geographic region. Additionally, A.M. Best considered the support and commitment of Honeywell's and Cedar's mission as positive rating factors.
A.M. Best expects Cedar's future operating performance to be stable but strong, and its stable earnings profile should further support the company in controlling its growth and business writings, which are consistent with its capital and surplus position.
Rating factors that could lead to an upgrade of Cedar's ratings or a positive outlook include a long-term consistently strong operating performance, maintaining strong risk-adjusted capital levels and executing its business plan. A.M. Best could downgrade the company's ratings or revise the outlook to negative if its Best's Capital Adequacy Ratio (BCAR) score declines, its operating performance and risk profile deteriorate, insured losses deplete capital or significant changes and turnover occur in its management. Also, downward pressure could occur if Cedar's risk management controls and tolerances or Honeywell's ratings deteriorate.
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.
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:
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.