OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” (Excellent) to Hagerty Reinsurance Limited (Hagerty Re) (Hamilton, Bermuda). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Hagerty Re’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The strong balance sheet assessment reflects Hagerty Re’s strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Additionally, the assessment is supported by Hagerty Re’s historical reserve adequacy, with favorable development and redundancies in most years, as well as favorable liquidity, financial flexibility, and a highly conservative investment portfolio. Further supporting Hagerty Re’s risk-adjusted capitalization, the company raised USD 25 million of capital in September 2023, through a 10-year non-amortizing loan from State Farm Mutual Automobile Insurance Company.
AM Best views Hagerty Re’s operating performance as strong, with combined ratios consistently below personal auto peer averages, providing the company with ample operating income year over year. The company’s underwriting profitability is driven partially by Hagerty Re’s underwriting and valuation expertise, superior claims handling ability, with a vast network of collector vehicle repair experts, a special investigation unit to deter fraudulent activity, and on-staff parts finders. The company’s underwriting performance drives the majority of its net income, as Hagerty Re’s investment allocation is almost entirely allocated to low-yielding cash investments. However, Hagerty Re is benefiting currently from higher interest rates, which AM Best expects to generate outsized returns in 2023 compared with prior years. Capital generation has historically been entirely reliant on underwriting activity.
AM Best views Hagerty Re’s business profile as neutral. Though the company is essentially a mono-line niche writer with a relatively small share of a larger market, Hagerty Re has dominant name recognition within the enthusiast vehicle space. Additionally, Hagerty Re partners with the world’s largest auto insurers, reducing competition within their market. These large primary insurers work with the company due to their unique expertise and data advantage in the space, which relies heavily on partnerships with specialty auto shops and their ability to source replacement parts.
AM Best assesses Hagerty Re’s ERM as appropriate for its size and scope. The company monitors and manages its operating risks through its management processes, stress testing scenarios, and robust risk mitigation plans to reduce losses when catastrophic activity is expected to occur.
The outlook of these credit ratings is stable; it is AM Best’s expectation that Hagerty Re will continue to grow capital organically through favorable underwriting results, as well as investment income, to meet the capital demands of its growing book of business and maintain a strong level of risk-adjusted capitalization.
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