OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of A+ (Superior) and issuer credit rating of “aa” of Seaworthy Insurance Company (Seaworthy) (Annapolis, MD). The ratings have been assigned a stable outlook.
On November 6, 2009, A.M. Best placed the ratings on all rated members of Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK.A and BRK.B] under review with negative implications as a result of the Berkshire acquisition of the remaining 77% of Burlington Northern Santa Fe (BNSF) railroad, which was not already owned. The under review status reflected A.M. Best’s concerns regarding the potential utilization of Berkshire’s insurance and reinsurance operations as a funding source for the transaction given the size of the acquisition. Additionally, A.M. Best was concerned with the potential liquidity impact on some of the insurance and reinsurance operations given their exposure to high severity events. Based on a review of the group’s financial position as of December 31, 2009 and following the close of the BNSF acquisition, A.M. Best’s concerns have been largely mitigated or resolved.
The ratings reflect Seaworthy’s strong capitalization, historic underwriting profitability indicative of management’s niche ocean marine expertise and the implicit and explicit financial support provided by the ultimate parent, Berkshire, and a Berkshire subsidiary in the form of two significant reinsurance transactions.
The reinsurance transactions include a loss portfolio transfer and quota share agreement between Seaworthy and National Indemnity Company (Omaha, NE), which acquired Seaworthy’s immediate parent, Boat America Corporation, in August 2007. In addition to Berkshire’s track record of supporting its member companies, these transactions demonstrate in effect the explicit commitment provided by Berkshire, for which Seaworthy receives rating enhancement.
These positive rating factors are partially offset by Seaworthy’s product and revenue concentration, as well as the recent deterioration in operating performance. Despite these factors, the outlook is based upon Seaworthy’s enhanced financial flexibility, strong balance sheet and A.M. Best’s expectation of improvement in underwriting results to more historic levels.
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The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.
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