AM Best assigns credit ratings to Fidvest US LLC
OLDWICK, NJ – (BUSINESS WIRE) –AM best has assigned a financial strength rating of A- (Excellent) and an issuer’s long-term credit rating of “a-” to Fidvest US LLC (Fidvest) (Charleston, SC). The outlook for these credit ratings (ratings) is stable. Fidvest is a pure captive insurance company 100% owned by FMR LLC (FMR). FMR, doing business as Fidelity Investments, is a diversified financial holding company providing investment management, retirement, brokerage, financial planning and wealth management services.
The ratings reflect the strength of Fidvest’s balance sheet, which AM Best considers to be very strong, as well as its marginal operational performance, limited business profile, appropriate enterprise risk management (ERM) and a noticeable improvement in the rating it has achieved. ‘it receives from its ultimate parent company, FMR. .
Fidvest’s assessment of the strength of the balance sheet, which is very strong, reflects the highest level of risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR), through leverage underwriting, premium balances having remained relatively stable for several years. The company’s prudent investment risk profile and strong liquidity position further enhance the strength of the balance sheet. The volatility of the loss reserve balances in recent years, with an unfavorable development reported for both calendar and accident years, partially offsets Fidvest’s better BCAR score.
The operational performance of the company is marginal, as loss costs have exceeded premium income, resulting in negative operating results and performance measures that compare unfavorably to its composite peers. This in part reflects the activity assumed by the captive, which acts as a work layer franchise program and is subject to a higher frequency of loss. Professional liability claims and related litigation costs have resulted in high combined ratios in recent years.
Fidvest’s business profile is limited as it covers professional liability, workers’ compensation, property, automobile liability, general liability and cyber coverage of its parent company in the form of reimbursement policies. deductible. Fidvest maintains an ERM structure suitable for a company of its size. As a captive of FMR, Fidvest also benefits from and is an integral part of the parent company’s ERM framework.
Finally, the ratings are enhanced by its ultimate patent, FMR, a large, diversified financial services organization. The rating improvement takes into account the strategic importance of Fidvest to FMR, as well as FMR’s ability to provide financial flexibility to Fidvest should this become necessary.
The stable outlook reflects AM Best’s expectations that Fidvest’s risk-adjusted capitalization will remain at the highest level and that the prospective technical and operational performance will be in line with management’s expectations.
Negative ratings could arise if future operating results do not meet management’s expectations or if there is a material deterioration in risk-adjusted capitalization, as measured by the BCAR. Negative rating actions can also occur if the strategic importance of the business to the ultimate parent company changes. Positive rating actions could occur if improved and demonstrated operating results are sustained over several years.
AM Best remains the leading rating agency for alternative risk transfer entities, with more than 200 such vehicles rated in the United States and around the world. To view Best’s current credit ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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