A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of National Guaranty Insurance Company of Vermont (NGIC) (Burlington, VT). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect NGIC’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

The ratings support NGIC’s role as a captive insurance company of Waste Management, Inc. (WM) [NYSE: WM], a leading company in the waste management industry. The captive benefits from the parental support and robust risk management strategies afforded to it from WM as important factors of the company’s overall financial assurance program. The active risk management has benefited capitalization through loss prevention to generate consistently positive earnings.
Partially offsetting these factors is the large percentage of policyholder surplus loaned back to WM in the form of a 24-hour demand note that has caused liquidity measures to underperform its peers. This factor is mitigated partially by WM’s balance sheet size and operating cash flow, which could readily fulfill the loan obligation, if required. Capital levels also are monitored by the Vermont Department of Financial Regulation, which requires the company to maintain a certain aggregate exposure to capital ratio. Additionally, NGIC’s expense ratio compares unfavorably with the surplus lines composite due to the nature of the financial assurance line of business and expenses focused on risk mitigation. However, the company has been able to reduce underwriting expenses significantly over the past five years to further benefit operating and net income.
Due to the nature of the relationship between NGIC and WM, changes in WM’s credit risk can have an impact on NGIC’s ratings, as it is dependent on WM’s ability to support its credit risk profile, competitiveness and risk management. The captive continues to be an integral component of WM’s risk management platform. A.M. Best’s view of third-party credit ratings and market-based credit risk measures of WM indicates stability, resulting in NGIC’s outlooks remaining stable.
Positive rating action could occur if NGIC’s operating performance materially improves while maintaining the appropriate level of risk-adjusted capitalization. Negative rating impact could occur if the company’s balance sheet strength deteriorates materially to levels that do not support its risks. Negative rating also could occur if the parent experiences financial distress and deterioration to its credit profile.

Source: A.M.Best 2018-03-31