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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 06, 2013 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of aa+ of United States Liability Insurance Company (USLI) (Wayne, PA) and its subsidiaries, Mount Vernon Fire Insurance Company (MVF) (Wayne, PA) and U.S. Underwriters Insurance Company (USU) (Bismarck, ND). A.M. Best also has assigned an FSR of A++ (Superior) and ICR of aa+ to Mount Vernon Specialty Insurance Company (MVS) (Wayne, PA). The outlook for all ratings is stable.
The ratings reflect USLIs strong capitalization, outstanding long-term operating profitability and the advantages derived from managements strict underwriting and price discipline. USLI also benefits from the operating flexibility afforded through its use of admitted and non-admitted paper, its continued focus on service and its effective sales and marketing strategy. The ratings further recognize managements conservative loss reserving strategy as well as its prudent catastrophe management philosophy.
A.M. Best also recognizes the implicit and explicit support provided by USLIs ultimate parent, Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK.A and BRK.B], and the added financial flexibility afforded by National Indemnity Company (NICO), a Berkshire subsidiary, via loss portfolio transfer agreements and quota share reinsurance support.
As of January 1, 2007, USLI, MVF and USU entered into 50% loss portfolio transfer agreements and 50% quota share reinsurance agreements with NICO. The effect of these transactions led to a substantial reduction in USLIs underwriting leverage, which facilitated an extraordinary dividend taken that year.
Partially offsetting these positive rating factors is USLIs high investment leverage, which includes asset concentration risks associated with a limited number of common stock holdings and multiple notes held by one issuer.
The initial ratings assigned to MVS largely reflect the implicit and explicit support provided to MVS by its immediate parent, MVF, in the form of a 100% quota share reinsurance contract.
Downward rating pressure could materialize if risk-adjusted capital and/or operating performance fall markedly short of A.M. Bests expectations, including a significant deterioration in loss trends and/or any material disruptions to its present business strategy. These ratings are also contingent on the continuation of explicit reinsurance support provided by MVF to MVS and NICO to its affiliates, which provides substantial risk transfer and additional capacity.
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.