A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and issuer credit rating of “aa” of Seaworthy Insurance Company (Seaworthy) (Annapolis, MD).The outlook for both ratings is stable.
The ratings reflect Seaworthy’s supportive capitalization, favorable underwriting results indicative of the inherent benefits and advantages afforded by management’s specialty niche ocean marine expertise, as well as the implicit and explicit financial support provided by its ultimate parent, Berkshire Hathaway Inc. (Berkshire), (NYSE: BRK.A and BRK.B) and a Berkshire subsidiary in the form of significant reinsurance transactions.
The reinsurance transactions include a loss portfolio transfer and quota share agreements between Seaworthy and National Indemnity Company, which acquired Seaworthy’s immediate parent, Boat America Corporation, in August 2007. In addition to Berkshire’s track record of supporting its member companies, these transactions demonstrate in effect the explicit commitment provided by Berkshire and from which Seaworthy receives rating enhancement.
These positive rating factors are partially offset by Seaworthy’s product and revenue concentration, its very low investment returns driven by its highly liquid, low credit risk asset portfolio comprised mostly of cash, and the risks associated with expansion beyond the business generated from members of the Boat Owners Association of The United States. Despite these factors, the outlook is based upon Seaworthy’s enhanced financial flexibility, strong balance sheet and historic underwriting profitability.
Negative rating actions could occur if Seaworthy’s capitalization and/or operating performance falls markedly short of A.M. Best’s expectations, as a result of significant deterioration in loss trends and any sudden change in parental commitment. Given Seaworthy’s limited business scope, the ratings also are subject to any sudden shifts within its core market niche, a drastic change in its business profile and any sudden and unforeseen disruption in its distribution.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Catastrophe Analysis in A.M. Best Ratings”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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