AM Best has affirmed the Financial Strength Rating of A++ (Superior) and the Long-Term Issuer Credit Ratings of "aa+" of United States Liability Insurance Company (USLI) (Wayne, PA) and its subsidiaries: Mount Vernon Fire Insurance Company (MVF) (Wayne, PA), U.S. Underwriters Insurance Company (USU) (Bismarck, ND), Mount Vernon Specialty Insurance Company and Radnor Specialty Insurance Company (both domiciled in Omaha, NE). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect the insurance operating companies’ consolidated balance sheet strength, which AM Best categorizes as strongest, as well as their very strong operating performance, neutral business profile and appropriate enterprise risk management. These pillars are evidenced by USLI’s extended trends of underwriting and operating profitability, superior risk-adjusted capital position, relevant market presence and conservative reserve positions. Additional positive rating factors include a high level of diversification in the companies’ books of business with regard to concentration limits; proactive claims management philosophy; and commitment to customer service. Furthermore, these ratings continue to benefit from implicit support provided to USLI and its subsidiaries by their ultimate parent, Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK-A and BRK-B], and explicit support from their affiliate, National Indemnity Company.
This support for some of the operating companies is in the form of significant reinsurance treaties with National Indemnity Company, a Berkshire subsidiary. In addition to this agreement, Berkshire has established an extended track record of supporting its member companies.
In 2019, the group experienced slight deterioration in underwriting ratios due to difficulties in their personal umbrella product in certain territories. In response, the group has made key underwriting and pricing changes to personal umbrella. As a result, the group’s underwriting results have begun to normalize. In 2020, the group has experienced balance sheet volatility due to equity market devaluations related to COVID-19. The group’s large allocation in common stocks exposes them to significant volatility. However, the group is well-positioned to accept this risk due to their low underwriting leverage and the investment managers’ historical trend of success in volatile markets. AM Best also conducted stress tests on the group’s risk-adjusted capitalization, which incorporate multiple assumptions related to the market impact of COVID-19. USLI performed well under all stressed scenarios, and management believes the impact of COVID-19 will be manageable.
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