OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of A++ (Superior) and the issuer credit ratings (ICR) of “aaa” of National Indemnity Company (National Indemnity) (Omaha, NE) and its affiliates. Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Finial Reinsurance Company (Stamford, CT), as well as the ICR of “bbb-” and the issue rating of “bbb-” of Finial Holdings Inc. (Delaware). A.M. Best also has affirmed the FSR of A++ (Superior) and the ICR of “aa+” of Berkshire Hathaway Life Insurance Company of Nebraska (BHLN) and the FSR of A+ (Superior) and the 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 continues to be 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.
National Indemnity’s operating performance is enhanced by the investment returns generated by the strategies of the chief executive officer (CEO) of its parent Berkshire, 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 in the superior range.
Partially offsetting these strengths is National Indemnity’s exposure to higher levels of equity investments as compared with 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 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.
The ratings of BHLN recognize its adequate level of risk-adjusted capitalization, steady flow of transaction activity and the implicit and explicit benefits of being part of the Berkshire organization. Partially offsetting these positive rating factors are BHLN’s fluctuating statutory operating trends driven by the deal flow and mortality results on certain blocks, increased exposure to interest sensitive business and its heavy concentration in affiliated non-insurance investments.
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 or the company experiences a series of operating losses over several years that exceed A.M. Best’s expectations.
The FSR of A++ (Superior) and the 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
The following issue rating has been affirmed:
Finial Holdings, Inc.—
-- “bbb-” on $200 million 7.125% senior unsecured notes, due 2023
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.
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