KBRA assigns an A- insurance financial strength rating (IFSR) to The Philadelphia Contributionship For The Insurance Of Houses From Loss By Fire, Inc. (TPC), The Philadelphia Contributionship Insurance Company, and Germantown Insurance Company. KBRA also assigns a BBB- issuer rating to The Philadelphia Contributionship Mutual Holding Company. The Outlook for all ratings is Stable.

TPC is the oldest property insurance company in the United States today. It primarily writes homeowners’ and dwelling fire insurance in Pennsylvania and New Jersey.

The rating reflects TPC’s strong risk adjusted capitalization and solid surplus growth over the past decade, resulting in conservative underwriting leverage ratios that are well below the industry average. The rating also reflects TPC’s strong management with a deep bench, consistent favorable prior year reserve development, a sound Enterprise Risk Management framework that is appropriate for the company’s size, and an investment portfolio that has historically provided favorable investment returns.

Balancing these strengths are TPC’s heightened level of investment risk, with equities comprising approximately 68% of the investment portfolio excluding cash. However, equity market volatility is partially offset by TPC’s high-quality bond portfolio and an equity portfolio that consists primarily of blue-chip stocks. Profitability metrics have been unfavorable in recent years due to excessive growth arising out of a previous expansion strategy. Management has adopted a three-year plan to reverse this trend primarily by raising rates to an adequate level and restructuring their agency distribution system, along with a variety of other initiatives.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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