AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" of National Guaranty Insurance Company of Vermont (NGIC) (Burlington, VT). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect NGIC’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
The ratings support NGIC’s role as a captive insurance company of Waste Management, Inc. (WM) [NYSE: WM], a leading provider of comprehensive waste management environmental services in North America. The captive benefits from the parental support and robust risk management strategies afforded to it from WM as important factors of the company’s overall financial assurance program. The active risk management has benefited capitalization through loss prevention to generate consistently positive earnings.
Partially offsetting these factors is the large percentage of policyholder surplus loaned back to WM in the form of a 24-hour demand note that has caused liquidity measures to underperform its peers. This factor is mitigated partially by WM’s balance sheet size and operating cash flow, which could fulfill the loan obligation readily, if required. Capital levels also are monitored by the Vermont Department of Financial Regulation, which requires the company to maintain a certain aggregate exposure to capital ratio. Additionally, NGIC’s expense ratio compares unfavorably with the surplus lines composite due to the nature of the financial assurance line of business and expenses focused on risk mitigation. However, the company has been able to reduce underwriting expenses significantly over the past five years to further benefit operating and net income.
Due to the nature of the relationship between NGIC and WM, changes in WM’s credit risk can have an impact on NGIC’s ratings, as it is dependent on WM’s ability to support its credit risk profile, competitiveness and risk management. The captive continues to be an integral component of WM’s risk management platform. AM Best’s view of third-party credit ratings and market-based credit risk measures of WM indicates stability, resulting in NGIC’s outlooks remaining stable. Additionally, AM Best notes NGIC’s balance sheet remains very strong and its operations remains strong and profitable as an essential business in the COVID-19 environment, while meeting waste management needs of its customers.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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Kourtnie Beckwith, CPCU, AU, AMIM
+1 908 439 2200, ext. 5124
Senior Financial Analyst
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Manager, Public Relations
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Director, Public Relations
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