A.M. Best Co. has upgraded the financial strength rating to B++ (Very Good) from B+ (Very Good) of Guardian Insurance Company, Inc. (Guardian) (St Thomas, U.S. Virgin Islands). The rating outlook is stable.
The rating reflects the company’s adequate capitalization, favorable operating results and dominance in both market share and distribution in the U.S. Virgin Islands. The rating also reflects the financial support Guardian receives from its ultimate parent, Lockhart Companies Incorporated (Lockhart) (U.S. Virgin Islands), a major real estate developer in the Caribbean.
Guardian’s underwriting and operating results have improved substantially in recent years and compare favorably to its regional peer group. The company’s business mix, which is heavily weighted in the U.S. Virgin Islands’ auto sector, helps reduce its exposure to severe catastrophic events in the region. In addition, Guardian received a total capital contribution of $1.75 million from its parent during 2004 and 2005 to support growth and improve capitalization.
Partially offsetting these positive rating factors are Guardian’s elevated underwriting leverage and premium growth in recent years attributable to heightened auto insurance requirements mandated by the government of the U.S. Virgin Islands. The surge in auto coverage required capital contributions from Lockhart, which have since lowered leverage measures to more acceptable levels.
In addition, the limited geographic concentration of Guardian’s book of business exposes it to both regulatory risk and catastrophic activity. To mitigate its catastrophe exposure, the company has limited its net property writings and maintains a conservative reinsurance program.
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