OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has assigned the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” to Fidvest US LLC (Fidvest) (Charleston, SC). The outlook assigned to these Credit Ratings (ratings) is stable. Fidvest is a pure captive insurance company wholly owned by FMR LLC (FMR). FMR, doing business as Fidelity Investments, is a diversified financial holding company offering investment management, retirement, brokerage, financial planning and wealth management services.
The ratings reflect Fidvest’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile, appropriate enterprise risk management (ERM) and one notch of rating enhancement that it receives from its ultimate parent, FMR.
Fidvest’s balance sheet strength assessment of very strong reflects the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), driven by conservative underwriting leverage as premium balances have remained relatively stable over several years. Further enhancing balance sheet strength is the company’s conservative investment risk profile and strong liquidity position. Partially offsetting Fidvest’s strongest BCAR score level is the volatility in loss reserve balances over several recent years, with adverse development reported on both calendar and accident years.
The company’s operating performance is marginal as loss costs have exceeded premium revenue resulting in negative operating results and return measures that compare unfavorably with its composite peers. This in part reflects the business taken on by the captive, which acts as a working layer deductible program and is subject to higher loss frequency. Professional liability claims and related litigation expenses have caused elevated combined ratios over the past several years.
Fidvest’s business profile is limited, as it covers professional liability, workers’ compensation, property, automobile liability, general liability and cyber coverage for its parent in the form of deductible reimbursement policies. Fidvest maintains an ERM structure that is appropriate for a company of its size. As a captive of FMR, Fidvest also benefits from, and is an integral part of, the parent’s ERM framework.
Lastly, the ratings receive lift from its ultimate patent, FMR, a large and diversified financial services organization. The rating enhancement considers Fidvest’s strategic importance to FMR, as well as FMR’s ability to provide financial flexibility to Fidvest should it become necessary.
The stable outlooks reflect AM Best’s expectation that Fidvest's risk-adjusted capitalization will remain at the strongest level and that prospective underwriting and operating performance will be in line with management’s forecasts.
Negative rating actions could occur if future operating results are not in line with management’s expectations or if there is a significant deterioration in risk-adjusted capitalization, as measured by BCAR. Negative rating actions may also occur if the company's strategic importance to the ultimate parent were to change. Positive rating actions could occur if there is demonstrated, improved operating results that are sustained over several years.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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