OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and downgraded the Long-Term Issuer Credit Ratings to “a” from “a+” and affirmed the Financial Strength Rating of A (Excellent) of Germantown Insurance Company, Philadelphia Contributionship Insurance Company and The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, Inc., which are members of the Philadelphia Contributionship Group (the Contributionship). The outlook assigned to these Credit Ratings (ratings) is stable. All companies are domiciled in Philadelphia, PA.
The ratings were placed under review with negative implications on Oct. 13, 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The current rating actions follow the completion of A.M. Best’s analysis of the Contributionship under the updated BCRM.
The ratings reflect the Contributionship’s balance sheet, which A.M. Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The stable outlooks reflect the Contributionship’s improving trend of underwriting profitability, which A.M. Best expects to support balance sheet strength.
The Contributionship’s balance sheet strength reflects the strongest level of risk-adjusted capitalization, a comprehensive reinsurance program and historically favorable reserve development. Partially offsetting these positive rating factors is the elevated common stock leverage compared with the personal property composite.
The Contributionship’s operating performance was volatile in the past, driven by weather-related losses. However, significant underwriting initiatives and the reduction in coastal property exposures have improved results in recent years. The Contributionship’s long-standing history in the Mid-Atlantic personal property market is supportive of the neutral business profile assessment. Furthermore, the Contributionship serves a niche market of under-served urban areas. The Contributionship also benefits from an appropriate ERM program that supports the risk profile of the organization.
Further negative rating action could occur if there is a material decline in risk-adjusted capitalization due to deteriorating operating profitability. Negative rating action could also occur if there is a significant decline in the valuation of the equity portfolio. Positive rating action could occur if there is a continued trend of profitable underwriting results to levels in line with its composite.
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