AM Best has affirmed the financial strength rating (FSR) of A- (Excellent) and the long-term issuer credit rating (Long-Term ICR) of “a-“ (Excellent) for Finial Reinsurance Company, located in Stamford, Connecticut and an indirect subsidiary of Berkshire Hathaway.
Both ratings having been assigned a stable outlook, based on its robust balance sheet, which AM Best categorizes as very strong. The company also benefits from an adequate operational performance, a limited business profile, and an effective enterprise risk management (ERM) framework, it stated.
Key to these ratings is the company’s exceptional level of risk-adjusted capitalization, as determined by Best’s Capital Adequacy Ratio (BCAR). This strength is somewhat balanced by the company’s narrow prospective business scope, given it has not written any substantial premium since it began winding down its liabilities in 2004.
Over recent years, Finial Reinsurance’s capital growth has been driven primarily by investment returns. Notably, the company’s surplus saw a significant increase due to its exposure to equity markets, although it recorded a decrease to $628 million at the end of the third quarter of 2023, down from $892 million at the end of 2022.
This reduction was mainly the result of a $370 million dividend payment, the proceeds of which were largely used by its parent company, Finial Holdings Inc., to settle its outstanding public debt. The management of invested assets is undertaken by Berkshire.
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