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A.M. Best Affirms Ratings of National Guaranty Insurance Company of Vermont

July 22, 2014



OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Besthas affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of ďa-Ē of National Guaranty Insurance Company of Vermont (NGIC) (Burlington, VT). The outlook for both ratings is stable.

The ratings of NGIC reflect its excellent risk-adjusted capitalization, operating performance and liquidity positions, as well as its sophisticated risk management strategy and practices, conservative investment strategy, its management teamís extended experience in the industry and its parentís, Waste Management, Inc. (WM), operational controls.

Partially offsetting these positive rating factors is that a large percentage of NGICís surplus is loaned back to WM, which is supported by a 24-hour demand note. However, capital levels at NGIC are monitored by the state, and the company must maintain a certain aggregate exposure to capital ratio as prescribed by the Vermont Department of Financial Regulation.

NGIC was incorporated on April 29, 1989, is licensed in Florida and operates as a surplus lines carrier in several other states. In total, NGIC is currently providing financial assurance coverage in 18 states and issuing surety bonds in 24.

As a pure captive established to meet the financial assurance obligations of WM, under Subtitle D of the Resource Conservation and Recovery Act, NGICís financial strength is closely tied to the financial position of WM. The coverages written apply to landfills owned and/or operated by subsidiaries of WM (WM-owned landfills), and assure that as of the date of closure, there will be sufficient funds to pay for proper closure and post-closure activities, such as ďcappingĒ and monitoring of the site. The reserves for these coverages are maintained on the parentís balance sheet. WMís ability to adhere to its strict operating guidelines, including reserve adequacy, ensures that NGIC has minimal exposure to losses.

A.M. Best views the management and corporate strategy as strengthening to the ratings, given NGICís conservative underwriting, operational goals and transparency. A.M. Best views NGICís enterprise risk management practices as strong given the impact on the conservative risk culture, defined risk controls and its capital and surplus. Other factors A.M. Best considered in the ratings process include, but are not limited to, the geographical diversification, as well as the support and commitment of WM to NGIC as well as NGICís mission.

A.M. Best expects NGICís future operating performance to be stable, and a strong and stable earnings profile should provide further support to control its growth and business writings, which are consistent with its capital and surplus position.

NGICís ratings are not expected to be upgraded within the next 12-24 months as its operating performance and capital position already have been considered in the ratings process. The ratings could be downgraded if NGICís Bestís Capital Adequacy Ratio (BCAR) score declines, its operating performance and risk profile deteriorates, insured losses deplete capital, significant changes and turnover occur in its management team and/or risk management controls and tolerances or WMís financial condition deteriorates.

A.M. 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 Bestís Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

The methodology used in determining these ratings is Bestís Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestís rating process and contains the different rating criteria employed in the rating process. Bestís Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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 © 2014 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.





A.M. Best Company

Fred Eslami

Senior Financial Analyst

(908) 439-2200, ext. 5406

fred.eslami@ambest.com

or

Steven Chirico, CPA

Assistant Vice President

(908) 439-2200, ext. 5087

steven.chirico@ambest.com

or

Christopher Sharkey

Manager, Public Relations

(908) 439-2200, ext. 5159

christopher.sharkey@ambest.com

or

Jim Peavy

Assistant Vice President, Public Relations

(908) 439-2200, ext. 5644

james.peavy@ambest.com



Source: A.M. Best Company


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