AM Best upgraded the financial strength rating of the member companies of CapSpecialty Insurance Group (CapSpecialty) to A+ (Excellent) from A (Excellent), the long-term issuer credit rating to “aa-” (Excellent) from “a+” (Excellent), and the outlook was changed to stable from positive.
Members include Capitol Indemnity Corporation, Capitol Specialty Insurance Corporation and Platte River Insurance Company, collectively known as CapSpecialty.
AM Best said the ratings reflected CapSpecialty’s balance sheet strength, which it assessed as strongest, as well as adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings agency noted that CapSpecialty has maintained its highest level of risk-adjusted capital and benefited from significant reinsurance agreements with its affiliate National Indemnity Company, which have reduced CapSpecialty’s net premium and reserve leverage.
CapSpecialty’s investments are managed by Berkshire Hathaway Inc. and allocations to common stocks with high intrinsic value are expected to increase over time.
However, the portfolio is now almost entirely invested in U.S. Treasuries, and investment income has been a strong driver of CapSpecialty’s operating earnings.
AM Best’s current assessment of CapSpecialty’s operating performance is sufficient. The rating upgrade reflects AM Best’s view that the underwriting actions taken by the group have improved underwriting performance and reduced volatility, which has proven to be sustainable over time. CapSpecialty’s underwriting metrics and overall profitability are consistent with an adequate operating performance assessment and are expected to maintain their favorable trends for the foreseeable future.
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