A.M. Best Upgrades Issuer Credit Rating of Petroleum Marketers Management Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has upgraded the issuer credit rating to “bbb+” from “bbb” and affirmed the FSR of B++ (Good) of Petroleum Marketers Management Insurance Company(PMMIC) (Des Moines, IA). The outlook for both ratings has been revised to positive from stable.

The ratings 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. 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 positive outlook reflects A.M. Best’s expectation that the company’s operating performance and risk-adjusted capitalization will continue to improve in the medium term.

These positive factors are offset by PMMIC’s limited business profile as the company 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.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Scott Dodd, 908-439-2200, ext. 5582
Financial Analyst
[email protected]
or
Gerard Altonji, 908-439-2200, ext. 5626
Assistant Vice President
[email protected]
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Co.