AM Best Affirms Credit Ratings of Factory Mutual Insurance Company and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of "aa" (Superior) of Factory Mutual Insurance Company (Johnston, RI) and its subsidiaries, which are collectively referred to as FM Global Group (FM Global). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies.)

The ratings reflect FM Global's balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

FM Global maintains the strongest level of risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR). The group's balance sheet has proven long-term resilience against natural catastrophe losses, as experienced in 2017 and 2018. Augmenting sizable retentions for its highly protected risk book, substantial excess of loss reinsurance capacity plays an integral role in its ability to preserve and grow capital. Management has a history of protecting the balance sheet by prudently reserving losses in a timely fashion. Conservative initial reserve estimates often reflect worst-case underwriting results, especially in catastrophe scenarios. Superior knowledge of its risks and expedient settlement of claims enables the group to move efficiently on after significant events, with actual losses coming in well below modeled outcomes in most cases.

The group has reported profitable underwriting results in 2019 and 2020, as well as the first nine months of 2021, after two consecutive years of underwriting losses in 2017 and 2018, primarily due to significant catastrophe activity. Strong investment gains garnered on FM Global's sizeable investment portfolio, including a large allocation to equities, have further enhanced bottom-line results, driving solid growth in surplus. With FM Global's rebound in profitability and corresponding surplus growth, member credits have been approved to be paid in 2022 as distribution of excess profits to its policyholders after being curtailed in the three prior years.

FM Global has a unique market position, with considerable exposure to policyholders that have highly recognizable corporate brands, which can introduce headline or reputational risk for large exposure events, as has been seen amid ongoing COVID-19-related business interruption claim filings. AM Best is comfortable that FM Global's policies appropriately protect the group without denying its policyholder protections within its contractual coverages, and that its positions are defensible in preserving the company's strongest level of risk-adjusted capitalization.

The stable outlooks reflect AM Best's expectation that FM Global's risk-adjusted capitalization and operating performance will continue to exhibit generally excellent trends. AM Best expects that FM Global management's ERM practices will continue to drive commensurately strong returns in its niche business model. The company's risk appetite periodically results in volatile underwriting performance from catastrophe events that management has successfully navigated over the organization's long history. Negative rating action could result if operating performance or risk-adjusted capitalization falls markedly short of AM Best's expectations. Negative rating action also could result from a deterioration of non-catastrophe underwriting trends or a prolonged equity market downturn.

The FSR of A+ (Superior) and the Long-Term ICRs of "aa" (Superior) have been affirmed with stable outlooks for Factory Mutual Insurance Company and its following subsidiaries:

• Appalachian Insurance Company
• Affiliated FM Insurance Company
• FM Insurance Company Limited
• FM Insurance Europe S.A.

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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