Rating agency AM Best has downgraded the ratings of Philmont Insurance Company, a captive of construction company Toll Brothers.
AM Best downgraded Philmont’s financial strength rating to B (Fair) from B++ (Good) and the issuer credit rating to bb+ from bbb+. The outlook for both ratings is stable.
The rating agency said the downgrade reflects an increase in losses in 2014, which resulted in a significant drop in risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), to a level that no longer supported the prior rating.
“The current ratings and outlook reflect Philmont's adequate capitalisation and conservative operating strategy,” said AM Best. “The ratings also consider the company's critical role and favourable profile as part of the Toll Brothers organisation, as well as its strong operating performance during the past five years, providing insurance coverage to various projects and subsidiaries of Toll Brothers for certain liability risks.”
AM Best also considers the support and commitment of the parent and the captive's mission as positive factors. It added that Philmont's volatility of operating results and relatively large loss reserves partially offset the positive rating factors.
“Nevertheless, AM Best recognises the strong liquidity position of Philmont and the substantial financial resources of the Toll Brothers organisation,” said the rating agency.
AM Best, Ratings, North America, Philmont Insurance Company, Toll Brothers