AM Best has upgraded the Financial Strength Rating to A+ (Superior) from A (Excellent) and the Long-Term Issuer Credit Ratings to “aa-” (Superior) from “a+” (Excellent) for members of CapSpecialty Insurance Group (CapSpecialty), with the outlook revised to stable from positive.
The members consist of Capitol Indemnity Corporation, Capitol Specialty Insurance Corporation and Platte River Insurance Company, collectively known as CapSpecialty.
AM Best said the ratings reflect CapSpecialty’s balance sheet strength, which it assesses as strongest, alongside its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings agency noted that CapSpecialty’s risk-adjusted capitalisation has consistently been maintained at the strongest level and benefits from significant reinsurance agreements with its affiliate National Indemnity Company, which have reduced CapSpecialty’s net premium and reserve leverage ratios.
CapSpecialty’s investments are managed by Berkshire Hathaway Inc. and are expected to show increased allocations to common stocks with high intrinsic value over time.
However, the portfolio is currently almost entirely invested in U.S. Treasury bills, and investment income has been a strong tailwind for CapSpecialty’s operating earnings.
AM Best now assesses CapSpecialty’s operating performance as adequate. The rating upgrade reflects AM Best’s view that underwriting actions taken by the group have improved underwriting results and reduced volatility that have proven to be sustainable over time. CapSpecialty’s underwriting metrics and overall profitability have been consistent with an adequate operating performance assessment and are expected to maintain their favourable trends for the foreseeable future.
