AM Best Affirms Credit Ratings of Factory Mutual Insurance Company and Its Subsidiaries
AM Best has affirmed the Financial Strength Rating (FSR) 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 and ratings.)
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. 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. Ultimate losses routinely result in better outcomes than modeled losses and management's prudent and conservative initial reserve estimates, especially in catastrophe scenarios. Superior knowledge of its risks and expedient settlement of claims enables the group to move on fairly quickly after significant events.
FM Global has reported underwriting profits in four of the most recent five years, following two challenging years of underwriting losses in 2017, and 2018, from significant catastrophe activity. FM Global's recent underwriting initiatives that focused on improving risk selection and rate adequacy have been effective, with net underwriting income exceeding $1 billion in 2022, and through the first nine months of 2023, respectively. In addition, the group has garnered strong investment gains from its sizeable investment portfolio, which includes a large allocation to equities, further enhancing bottom-line results and driving solid surplus growth. The equity market recovery in 2023 also drove particularly solid investment results. With FM Global's solid profitability and corresponding surplus growth, policyholder credits were approved to be paid in 2023, in addition to a ?resilience credit' for renewing members.
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 group's high-risk tolerance periodically results in volatile underwriting performance from catastrophe events that management has successfully navigated over its long history.
Positive rating action may occur with manageable volatility reflected in FM Global's historically superior underwriting results, warranting a more favorable assessment in its operating performance or ERM relative to similarly assessed peers.
Negative rating action may occur if risk-based capitalization is materially weakened by deteriorating non-catastrophe underwriting trends or following a prolonged equity market downturn. In addition, negative rating action could result if operating performance erodes materially for an extended period relative to its strong assessment.
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 Performance Assessments, 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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