Best’s News & Research Service - February 18, 2015 04:14 PM (EST)
A.M. Best Downgrades Ratings of The Philadelphia Contributionship for the Insurance of Houses and Its Subsidiaries
- February 18, 2015 04:14 PM (EST)
Oldwick //BestWire// - A.M. Best has downgraded the financial strength rating to A (Excellent) from A+ (Superior) and the issuer credit ratings to "a+" from "aa-" of The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, Inc. (Philadelphia Contributionship) and its wholly owned subsidiaries, Philadelphia Contributionship Insurance Company and Germantown Insurance Company, collectively referred to as Philadelphia Contributionship Group (Group). All companies are domiciled in Philadelphia, PA. The outlook for all ratings has been revised to stable from negative.
The rating downgrades reflect the Group's concentration of property business, which has led to several years of underwriting volatility, driven by record catastrophic weather events and other severe storms such as in 2011 (Irene), 2012 (Sandy) and multiple storm losses in 2014. The frequency and severity of gross catastrophe losses were elevated over the past five years. However, policyholders' surplus over the past five years increased in spite of the sizable underwriting losses, because they were offset by net investment income, other income and capital gains in the investment portfolio.
The ratings of the Group reflect sustained, strong capitalization and long-standing market presence in Philadelphia and the surrounding areas. This is partially offset by the Group's concentration of property business, which exposes the Group to severe weather-related events. In addition, high investment leverage exists, which exposes the company to equity market volatility. These offsetting rating factors are somewhat mitigated by significant risk management strategies that are embedded throughout the organization and designed to address the key risk factors identified by management.
Factors that may lead to negative rating actions include sudden, unexpected and material decline in risk-adjusted capitalization, sustained deterioration in operating performance, or diminished liquidity measures. Factors that may lead to positive rating actions include sustained improvement in operating performance while maintaining strong levels of risk-adjusted capitalization and other performance measures.
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:
Analyzing Perpetual Insurers
Catastrophe Analysis in A.M. Best Ratings
Rating Members of Insurance Groups
Risk Management and the Rating Process for Insurance Companies
Understanding BCAR for Property/Casualty Insurers
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
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