Best’s News & Research Service - February 15, 2024 11:09 AM (EST)
AM Best Affirms Credit Ratings of Finial Reinsurance Company
- February 15, 2024 11:09 AM (EST)
//BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of Finial Reinsurance Company (Stamford, CT), an indirect subsidiary of Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK A and BRK B]. The outlook of these Credit Ratings (ratings) is stable.
The ratings of Finial Reinsurance Company reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The ratings also reflect Finial Reinsurance Company’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is partially offset by a myopic prospective book of business, which does not currently write any material premium as the company has been running off its liabilities since 2004. Capital generation in recent years has come largely from investment returns and protected by careful management of runoff liabilities. The company’s exposure to equity markets has grown surplus substantially in recent years. However, surplus declined to $628 million at the end of third-quarter 2023 from $892 million at year-end 2022 due to a dividend of $370 million, the proceeds of which were largely utilized by its parent, Finial Holdings Inc., to retire its outstanding public debt. Invested assets are managed by Berkshire.
The company’s runoff nature contributes to its limited business profile, strengthened by the ownership of its indirect parent, National Indemnity Company, which has a Long-Term ICR of “aaa” (Exceptional). Finial Reinsurance Company provides utility to the Berkshire organization by assuming select runoff liabilities from Berkshire affiliates, and an investment portfolio managed by Berkshire.
The ERM assessment of appropriate is driven by management’s expertise in running discontinued lines of business, and the ERM process is integrated with that of National Indemnity Company.
Concurrently, AM Best has withdrawn the Long-Term ICR of “bbb-” (Good) of Finial Holdings, Inc. (Delaware) as it was liquidated in December 2023 following the retirement of debt that matured in October 2023.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments. AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.