AM Best Revises Outlooks to Positive for Federated Underwriting Company

Key Terms

financial strength rating financial

A financial strength rating is an assessment of an organization's overall financial health, indicating how well it can meet its financial commitments. Think of it as a report card that shows whether a company or institution is financially stable and capable of withstanding economic challenges. This rating helps investors gauge the level of risk involved in engaging with or investing in that organization.

long-term issuer credit rating financial

A long-term issuer credit rating is an independent assessment of an organization’s ability to repay its debts over several years, like a report card that summarizes how likely it is to meet loan and bond obligations beyond the short term. Investors use it to judge risk and expected returns: higher ratings usually mean lower borrowing costs and safer bond investments, while lower ratings signal greater default risk, similar to choosing whether to lend money to a careful neighbor or a risky one.

enterprise risk management financial

Enterprise Risk Management is a process companies use to identify, assess, and prepare for potential problems that could disrupt their success, like financial losses or reputation damage. It’s like a safety plan that helps a business stay strong and adapt quickly when unexpected challenges come up. This helps the company protect its future and keep running smoothly.

captive financial

A captive is a company created by a parent firm to perform a specific function—often insurance, lending or other services—primarily for the parent and its affiliates rather than the general public. It matters to investors because captives move revenue, costs and risk inside a corporate group, which can improve efficiency or concentrate exposure; like an in‑house department acting as a private supplier, a captive can change cash flows and the visible strength of the parent’s balance sheet.

alternative risk transfer financial

A set of financial methods that moves risk away from a company using tools beyond ordinary insurance, often by turning parts of that risk into tradable investments or contracts. Think of it as slicing a big, uncertain bill into smaller pieces and selling those pieces to investors so a company reduces its exposure; for investors it creates distinct opportunities and potential returns tied to specific risks, and it can materially change a company’s balance sheet and cash-flow stability.

credit ratings financial

A credit rating is a short, standardized judgment about how likely a borrower is to repay debt, similar to a report-card grade for loans. Investors use these grades to judge risk quickly: higher ratings signal lower chance of default and usually lower interest costs, while lower ratings mean more risk, higher yields, and potential price drops — so ratings help decide whether a bond or loan fits an investor’s risk tolerance.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Federated Underwriting Company (Federated) (Colchester, VT).

The Credit Ratings (ratings) reflect Federated’s balance sheet strength, which AM Best 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 (State Street) [NYSE: STT].

This single-parent captive was formed and capitalized 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 organizations. 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.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Fred Eslami

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Source: AM Best