A.M. Best Co. has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and issuer credit rating to “a-” from “bbb+” of Petroleum Marketers Management Insurance Company (PMMIC) of Des Moines, Iowa. The outlook for both ratings has been revised to stable from positive.
The rating actions reflect PMMIC’s solid capitalization, sound operating performance and niche market focus within the underground storage tank (UST) and above ground storage tank (AST) businesses, A.M. Best said.
The ratings also recognize management’s long experience in the UST and AST businesses and its prudent business plans over the near term. PMMIC’s operating ratios, which have outperformed the industry composite, are reflective of its strict underwriting guidelines, with an emphasis on loss control, beneficial cost structure due to its management contract with its non-affiliated management company, Rounds and Associates, as well as tank inspection and monitoring efforts.
The stable outlook recognizes A.M. Best’s expectation that PMMIC’s operating performance and risk-adjusted capitalization will continue to be strong over the near term.
These positive rating factors are offset by PMMIC’s limited business profile as it provides a single product line, with most of its premiums written in a single state. Somewhat mitigating this issue is PMMIC’s recent entry into additional states, with the expectation that this issue will continue to diminish over the medium term.
In addition, while the company is amply capitalized for its current and anticipated level of operations, PMMIC maintains elevated common stock leverage. This reflects management’s strategy of investing the company’s excess capital in a well-diversified portfolio including equities while investing the capital required to support existing and projected underwriting operations in more conservative fixed income securities.
Furthermore, while PMMIC is dependent upon the services of its non-affiliated management company, the current contract is in place through year-end 2013 and provides for automatic annual renewal with a 365-day termination clause.
PMMIC’s ratings and/or outlook could be negatively impacted by unexpectedly large losses that would materially impact capitalization on a risk-adjusted basis.
Source: A.M. Best
Was this article valuable?
Here are more articles you may enjoy.
FBI Says Chinese Hackers Preparing to Attack US Infrastructure 
Uncertainty Keeps Prices Up; No Prior-Year Loss Development: Travelers 
Cargo Owners in Baltimore Disaster Face ‘General Average’ Loss Sharing, MSC Says 
Wildfires Are Upending Some of the Safest Bets on Wall Street 
