AM Best revises Federated outlook to positive
AM Best has revised the outlooks to positive from stable and affirmed the financial strength rating of A- and the long-term issuer credit rating of “a-” of Federated Underwriting Company.
AM Best said that the ratings reflect Federated’s balance sheet strength, which it assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The ratings also reflect the credit enhancement received from its ultimate parent, State Street Corporation.
This single-parent captive was formed and capitalised in 2019 as part of State Street’s alternative risk financing strategy in the wake of significant price firming in the insurance market. AM Best considers Federated’s business profile to be limited, and its sole purpose is to write specific risks related to State Street’s insurance programs. Federated’s historical operating performance has been assessed as adequate, which reflects AM Best’s neutral position until Federated’s business further matures and evolves. Consideration continues to be given to management’s projections and its ability to execute on these projections in conjunction with Federated’s overall mission and business plans.
The positive outlooks reflect AM Best's expectation that the captive will continue its solid operating performance, keep within its business plan, adhere to a level of capital supportive of its very strong balance sheet strength assessment and remain closely aligned with its parent, State Street, for which it also receives rating enhancement.
Finally, the ratings include a level of credit enhancement from State Street, one of the world’s largest financial service organisations. AM Best believes that given the captive nature of the business being insured, the interests of State Street and Federated are aligned directly, and additional capital and financial flexibility are available, if necessary.
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