|[May 21, 2014]
A.M. Best Affirms Ratings of Berkshire Hathaway Inc.'s Subsidiaries
OLDWICK, N.J. --(Business Wire)--
A.M. Best has affirmed the financial strength rating (FSR) of A++
(Superior) and issuer credit ratings (ICR) of "aaa" of National
Indemnity Company (Omaha, NE) (National Indemnity) and its
affiliates. Concurrently, A.M. Best has affirmed the FSR of A-
(Excellent) and ICR of "a-" of Finial Reinsurance Company
(Stamford, CT), as well as the ICR of "bbb-" and the debt rating of
"bbb-" of Finial Holdings Inc. (Delaware). A.M. Best also has
affirmed the FSR of A++ (Superior) and ICR of "aa+" of Berkshire
Hathaway Life Insurance Company of Nebraska (BHLN) and the FSR of A+
(Superior) and ICR of "aa-" of First Berkshire Hathaway Life
Insurance Company (FBHL) (New York, NY). These companies are all
subsidiaries of Berkshire Hathaway Inc. (Berkshire) (NYSE: BRK A
and BRK B). The outlook for all ratings is stable. All companies are
headquartered in Omaha, NE, unless otherwise specified. (See below for a
detailed listing of the companies and ratings.)
The affirmation for the ratings of National Indemnity reflects its
consistently superior operating performance, historically strong
risk-adjusted capitalization and global market profile. National
Indemnity's management team is adept at dealing with the underwriting
cycle and has the financial resources and acumen necessary to take
advantage of unique opportunities. A.M. Best believes that this
distinctive aspect and its superior market profile provide National
Indemnity with the ability to outperform the market in terms of
underwriting performance. Furthermore, National Indemnity's operating
performance is enhanced by the investment returns generated by the
strategies of its chief executive officer (CEO) Mr. Warren Buffett,
whose investment expertise is heavily relied upon to bolster the total
returns of the organization.
National Indemnity's risk-based capitalization remains consistently at
the superior level. Historically, the company has managed its aggregate
risk accumulations conservatively, and as a result, its risk-based
capitalization has continued to remain i the superior range, even after
being tested by a series of severe shock losses.
Partially offsetting these strengths is National Indemnity's exposure to
higher levels of equity investments as compared to most of its peers.
These higher levels of equity investments can result in volatile
results; however, A.M. Best's concern is somewhat mitigated by National
Indemnity's investment portfolio's superior long-term performance.
The importance of Mr. Buffett (as CEO) to the entire Berkshire
organization and the lack of transparency with regard to his successor
continue to pose a risk to the organization and is a concern for A.M.
Best. Although A.M. Best believes there are very strong internal
candidates to succeed Mr. Buffett, the lack of clarity in regards to a
chosen successor adds a degree of uncertainty to the future direction of
the corporation, as Mr. Buffett personally controls the capital
allocation within the firm. Nevertheless, A.M. Best believes Berkshire's
corporate strategy, culture and decentralized operating structure will
facilitate a successful transition in management when it occurs.
National Indemnity's ratings could experience negative rating actions if
large catastrophic losses in combination with large investment losses
decrease its risk-based capitalization below the expectations of A.M.
Best and/or the company experiences a series of operating losses over
several years that exceed A.M. Best's expectations.
The ratings of BHLN recognize its adequate level of risk-adjusted
capitalization, recent increased transaction activity and the implicit
and explicit benefits of being part of the Berkshire organization.
Partially offsetting these positive rating factors are BHLN's
underperforming block of mortality business and its heavy concentration
in an affiliated non-insurance common stock investments.
Positive rating movements for BHLN are unlikely. Key rating drivers that
may lead to negative rating actions include a material deterioration in
its operating performance, lack of capital support from the parent,
decreased importance within National Indemnity and/or substantial
deterioration in risk-adjusted capitalization as measured by Best's
Capital Adequacy Ratio (BCAR).
The FSR of A++ (Superior) and ICRs of "aaa" have been affirmed for National
Indemnity Company and its following affiliates:
Columbia Insurance Company
National Fire & Marine Insurance Company
National Liability & Fire Insurance Company
National Indemnity Company of Mid-America
National Indemnity Company of the South
Berkshire Hathaway Specialty Insurance Company
following debt rating has been affirmed:
-- "bbb-" on $200 million 7.125% senior
unsecured notes, due 2023
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's 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. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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