AM Best Assigns Ratings to Cadence Indemnity

AM Best has granted a financial strength rating of ‘B++’ (Good) and a long-term issuer credit rating of ‘bbb+’ to Cadence Indemnity, the single-parent captive of the Sullivan Brothers Family of Companies (SFBC).

The outlook for these ratings is assessed as ‘stable’.

These ratings reflect Cadence’s robust balance sheet, satisfactory operating performance, limited business profile, and appropriate enterprise risk management practices.

The company’s balance sheet strength is bolstered by its highest level of risk-adjusted capitalisation, as evaluated by Best’s Capital Adequacy Ratio (BCAR).

Furthermore, Cadence benefits from low underwriting leverage and minimal reliance on reinsurance arrangements.

Nonetheless, these strengths are tempered by the high per-occurrence limit retention on marine builders’ risk coverage relative to its surplus size. The company’s investment portfolio features a considerable level of equity exposure relative to its surplus, which may result in volatility during stock market fluctuations.

In 2023 and 2024, Cadence experienced small underwriting losses, with investment income being the principal source of pre-tax earnings.

The rating agency predicts that investment income will remain a key driver of earnings, while underwriting income is expected to increase over time.

Additionally, the company assumes clinic liability coverage from its fronting partner, Continental Casualty Company.

While Cadence’s risks have some geographical diversification due to SFBC’s national reach, the company offers a very limited range of coverage lines, which contributes to its limited business profile.