AM Best has assigned a financial strength rating of ‘B++’ (Good) and a long-term issuer credit rating of ‘bbb+’ to Cadence Indemnity, single-parent captive of the Sullivan Brothers Family of Companies (SFBC).
The outlook for these ratings is ‘stable’.
These ratings reflect Cadence's strong balance sheet, adequate operating performance, limited business profile, and appropriate enterprise risk management.
The company's balance sheet strength is supported by its strongest level of risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR).
Additionally, Cadence benefits from low underwriting leverage and minimal dependence on reinsurance.
However, these positives are offset by high per-occurrence limit retention on marine builders' risk coverage relative to its surplus size. The company's investment portfolio has a high level of equity exposure relative to its surplus, which can lead to volatility during stock market fluctuations.
In 2023 and 2024, Cadence reported small underwriting losses, with investment income being the primary source of pre-tax earnings.
The rating agency anticipates that investment income will continue to drive earnings, with underwriting income expected to grow over time.
The company also assumes clinic liability coverage from its fronting partner, Continental Casualty Company.
While Cadence's risks have some geographical spread due to SFBC's national reach, the company offers very limited lines of coverage, contributing to its limited business profile.
