RVI is one of the largest insurance companies that specialize in underwriting and marketing of residual value insurance for clients engaged in asset-based financing. Coverage is purchased by participants in asset-based finance transactions to obtain third-party financial support either due to regulatory and accounting issues or for protection against the unexpected decline in the market value of an asset.
The ratings reflect RVI’s operating and underwriting results, conservative investment portfolio and improvement in the market value of its insured assets, business profile and risk-adjusted capital. After a 2008 downturn in the economy that resulted in a significant decline in (1) the market values of its insured assets, (2) operating results and (3) demand for RVI’s primary insurance product, residual value insurance, the company took actions to stabilize and improve operating results and expand its narrow focused/concentrated client base. These specific actions included: the de-risking of its insured portfolio through the commutation of (1) passenger vehicle policies and/or pools of policies of higher risk assets and (2) RVI’s entire
The outlook reflects RVI’s operating results, risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio and its continued leading market position in providing residual value insurance. However, the ratings may be subject to change (i.e., downgraded or upgraded) and the outlook revised, again, should substantial changes occur in the following areas: financial market and/or economic conditions; demand for RVI’s residual value insurance product; risk-adjusted capital position; or operating performance.
These positive rating factors are tempered by RVI’s narrowed business profile as its primary business segments—passenger vehicle, commercial equipment and real estate—are highly dependent upon the performance and cyclicality of the asset-based financing/lending industry where RVI now predominately provides lower levels of risk coverage and catastrophe risk transfer. A less robust asset-based lending environment may constrain premium growth in the near future. In addition, there is an element of uncertainty that may potentially impact RVI’s operations and financial condition as a result of: proposed changes to lease accounting standards. Even though the impact to RVI appears to be minimal based upon the latest tentative broad decisions by both the
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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