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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JULY 25, 2013 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of Preferred Contractors Insurance Company Risk Retention Group, LLC (PCIC) (Billings, MT).
The ratings reflect PCIC’s adequate level of risk-adjusted capitalization and recent improvements in operating performance. The ratings also reflect management’s substantial expertise in marketing the type of business PCIC writes.
Partially offsetting these positive rating factors are PCIC’s volatile operating results during the first five years of operation, high expense ratio and limited business profile. An additional offsetting rating factor is the execution risk associated with the implementation of PCIC’s business plan.
Further rating factors are the company’s fundamental business strategies, which include providing stable pricing for insurance coverage coupled with quality service for its members. Reflecting its limited business profile, PCIC as an insurer is exclusively oriented toward one class of insureds. PCIC maintains a conservative operating strategy by limiting participation in its insurance program to members that meet stringent underwriting standards. PCIC provides general liability coverage to general contractors and subcontractors in the residential and commercial construction industry.
The stable outlook recognizes two consecutive years of PCIC’s improved underwriting results; thus, reducing A.M. Best’s concerns surrounding its historical volatile performance.
A.M. Best notes that PCIC has undertaken numerous strategic initiatives to improve underwriting profitability, including an innovative approach to determining adequate premium levels, implementing a new management claims model and restructuring its reinsurance program to minimize exposures. Nonetheless, A.M. Best will continue to monitor PCIC's progress in achieving its business plan to ensure that capitalization and overall operating results are achieved in accordance with A.M. Best’s expectations.
Upward rating movement is unlikely over the medium term. However, a deterioration in PCIC’s underwriting and overall operating performance and/or a materially weakening in its risk-adjusted capitalization could result in negative rating pressure.
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 Best's Captive Center.
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.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.