OLDWICK, N.J.--(BUSINESS WIRE)--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). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” (Good) and the Long-Term Issue Credit Rating of “bbb-” (Good) on $200 million, 7.125% senior unsecured notes, due 2023, of Finial Holdings, Inc. (Delaware). These companies are subsidiaries 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 offset by no prospective book of business, as the company has been in runoff since 2004. Capital generation in recent years largely has come from investment returns and careful management of runoff liabilities. The company’s exposure to equity markets has substantially grown surplus in recent years, though surplus declined in 2022 to $854 million from a high of $1.1 billion at year-end 2021. Invested assets are managed by Berkshire.
As premiums are virtually nonexistent and relate to reinsurance contracts with adjustable features and transactions between affiliates, pretax underwriting income was $17.8 million in 2021. That and pretax net investment income of $17.9 million drove net income of $30.7 million.
The company’s runoff nature contributes to its limited business profile, strengthened by the ownership of its 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.
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