AM Best affirms ratings of Apogee captive

AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Prism Assurance. The outlook of these ratings is stable.

Prism is the Vermont-domiciled single-parent captive insurance company of Apogee, one of the largest architectural design and construction companies in the United States.

AM Best assesses Prism’s business profile as limited as the company provides very specific lines of coverage to Apogee, although its risks do have a level of geographic diversification, reflecting the scope of the parent’s operations.

The ratings agency said there was manageable volatility in the company’s underwriting performance from the low frequency, high severity-type claims it was established to cover.

The parent contributes trademarks and associated royalty income to the captive in addition to interest from the parent loan-back to provide a steady stream of net investment income. Profitability metrics in terms of return on revenue, return on equity and return on invested assets far exceed industry averages on five- and 10-year terms.

The ratings reflect Prism’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

Prism’s balance sheet strength assessment of very strong is supported by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).

AM Best said Prism also has sufficient liquidity supported by the company’s ability to call on its loan-back to the parent, in addition to the financial flexibility afforded through the parent if needed.

The stable outlooks reflect AM Best’s expectation that the captive will maintain its very strong balance sheet strength and adequate operating performance supported by risk-adjusted capitalisation at the strongest level, steady streams of income from intangible assets and the execution of prudent risk management strategies.

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