AM Best Downgrades Credit Ratings of Guardian Insurance Company, Inc. and Echelon Property & Casualty Insurance Company

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has downgraded the Financial Strength Rating (FSR) to B++
(Good) from A- (Excellent) and the Long-Term Issuer Credit Rating
(Long-Term ICR) to “bbb+” from “a-” of Guardian Insurance Company, Inc.
(Guardian) (St. Thomas, Virgin Islands). The outlook of the FSR has been
revised to stable from negative, while the outlook of the Long-Term ICR
remains negative. Concurrently, AM Best has downgraded the FSR to B
(Fair) from B+ (Good) and the Long-Term ICR to “bb” from “bbb-” of
Echelon Property & Casualty Insurance Company (Echelon) (Chicago, IL).
The outlook of these Credit Ratings (ratings) is stable.

The ratings of Guardian reflect its balance sheet strength, which AM
Best categorizes as very strong, as well as its marginal operating
performance, neutral business profile and appropriate enterprise risk
management (ERM).

The rating actions reflect a revision of AM Best’s assessment of
Guardian’s operating performance to marginal. The rating downgrades are
in response to volatile operating performance over the previous years,
resulting in a deterioration of policyholder surplus. Furthermore, the
company has above-average leverage measures and high dependence on
reinsurance, as it is geographically concentrated in a catastrophe-prone
area. Results were impacted by adverse loss reserve development from
prior accident years. However, its most recent financial statements show
stabilization of its risk-adjusted capital position due to improved
performance. Nevertheless, Guardian’s elevated expense structure
continues to place pressure on Guardian’s underwriting performance.

As a significant player in the automobile segment, Guardian has been
operating in the U.S. Virgin Islands for 30 years, and its business
growth is attributed to its extensive distribution network. Guardian has
established strong name recognition and is the leading automobile writer
with a dominant share of the local market.

Guardian benefits from the financial flexibility and support of its
parent, Lockhart Companies, Inc., a major real estate developer
domiciled in the U.S. Virgin Islands.

The ratings of Echelon reflect its balance sheet strength, which AM Best
categorizes as weak, as well as its marginal operating performance,
limited business profile and appropriate ERM. Echelon receives lift due
to its strategic importance to Guardian, as it provides geographic
diversification. In addition, Echelon has received support in the form
of capital contributions from Guardian.

The rating actions reflect a revision of AM Best’s assessment of
Echelon’s balance sheet to weak. The rating downgrades are in response
to a material decline of risk-adjusted capitalization that has resulted
from a significant increase in unseasoned non-standard personal
automobile business. The premium growth resulted in increased leverage
measures, and reflects increased vulnerability of the capital base to
reserve inadequacy and dependence on reinsurers. While the most recent
operating performance shows some improvement for the company’s core line
of business, commercial auto, there is still uncertainty regarding the
personal automobile business’ profitability over the long term.

This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best’s Credit Ratings
. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view
Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases
.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

Contacts

Janet Hernandez
Senior Financial Analyst
+1
908 439 2200, ext. 5767

[email protected]

Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159

[email protected]

Richard Attanasio
Senior Director
+1 908 439
2200, ext. 5432

[email protected]

Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644

[email protected]

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