A.M. Best Co.
has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of
Lyndon Property Insurance Company
(Lyndon Property) (St. Louis, MO). The outlook for both ratings is stable.
The ratings of Lyndon Property reflect its solid capitalization, the explicit and implicit support provided by its ultimate parent,
Protective Life Corporation
(Protective) (headquartered in Birmingham, AL) [NYSE: PL] and the favorable underwriting results in its core business of vehicle extended service contracts (VSC).
While the trends in Lyndon Property’s core asset protection businesses are favorable, these positive rating factors are offset by weaker than expected results in its recreational vehicle (RV) segment, low new money yields and the earnings variability and drag caused by certain non-core, legacy businesses, which have since been placed into run off. The ratings also contemplate the challenges associated with multi-year policies in the context of pricing, the potential for escalating loss costs and its effects on future earnings.
Despite these challenges, the outlook for the ratings recognizes the recent rebound in the automobile industry and the earnings prospects to be garnered by Lyndon Property and other predominant VSC insurers. The outlook also assumes minimal earnings drag from Lyndon Property’s discontinued lines and reduced drag from its under-performing RV sector.
Factors that could lead to positive rating actions for Lyndon Property would be stabilized operating profitability, sustaining supportive risk-adjusted capital and becoming more strongly affiliated with or gaining more importance to Protective.
Negative rating actions could occur if the company’s risk-adjusted capital and/or operating performance fall markedly short of A.M. Best’s expectations, any sudden change in parental commitment, as well as any sudden and material deterioration in Protective’s earnings, financial leverage or interest coverage ratios.
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
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