News Column

A.M. Best Affirms Ratings of Spirit Insurance Company and Radius Insurance Company

August 15, 2014



OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Besthas affirmed the financial strength rating of A (Excellent) and the issuer credit ratings of ďaĒ ofSpirit Insurance Company (Spirit) (Burlington, VT) and Radius Insurance Company (Radius) (Cayman Islands). The outlook for all ratings is stable.

The ratings of Spirit and Radius are based on each companyís excellent capitalization, a history of profitable business written from a predecessor captive, as well as the position they hold as the captive insurers for their ultimate parent, Phillips 66 [NYSE:PSX]. The ratings also consider the level of commitment on the part of Phillips 66, whose management incorporates Spirit and Radius as a core element in its overall risk management program.

Partially offsetting these positive rating factors are Spirit and Radiusí exposure to large losses due to the limits offered on their respective policies, as well as their significant dependence on reinsurance protection.

Spirit provides property damage, business interruption and excess liability insurance to Phillips 66 and affiliates and subsidiaries related to domestic U.S. operations only, while Radius provides similar coverage (property damage, business interruption, excess liability), as well as marine hull and cargo insurance to Phillips 66 and affiliates and subsidiaries related to non-U.S. risks in which Phillips 66 has ownership.

Business written separately by Spirit and Radius each has a history of strong underwriting results and operating returns. The captivesí loss experience has remained favorable due in part to the strong loss control program at the parent. Phillips 66 conducts periodic reviews of Spirit and Radiusí potential loss exposures through a specialist in industrial risks. A single occurrence could result in a large loss that approaches each captiveís limits. Although the majority of Spiritís capital is loaned to its parent, there is limited counterparty risk due to the affiliation of the two companies.

A.M. Best believes that Spirit and Radius are well positioned at their current rating levels, and the ratings are not expected to be upgraded or their outlook revised in the near term. Nonetheless, key rating factors that could lead to negative rating actions include a significant and sustained decline in Spirit and Radius' risk-adjusted capitalization, net operating performance results that do not meet A.M. Bestís expectations or a material deviation from their risk profiles that could potentially undermine the stability of the ratings. In addition, deterioration in the credit profile of Phillips 66 could impact both companiesí ratings or if Cayman Islandsí country tier is downgraded it could impact Radius' ratings.

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, Inc.

Alexander Sarfo, 908-439-2200, ext. 5779

Senior Financial Analyst

alexander.sarfo@ambest.com

or

Steven M. Chirico, CPA, 908-439-2200, ext. 5087

Assistant Vice President

steven.chirico@ambest.com

or

Christopher Sharkey, 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, 908-439-2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com

Source: A.M. Best Company, Inc.


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