Press Release - JULY 19, 2016

A.M. Best Affirms Ratings of the Members of GEICO and GEICO Corporation


CONTACTS:
 Michael T. Venezia
Senior Financial Analyst
+1 908 439 2200, ext. 5034
michael.venezia@ambest.com

Greg Williams
Assistant Vice President
+1 908 439 2200, ext. 5815
greg.williams@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - JULY 19, 2016
A.M. Best has affirmed the financial strength rating (FSR) of A++ (Superior) and the issuer credit ratings (ICR) of “aaa” of the members of Government Employees Group (GEICO) (Chevy Chase, MD). In addition, A.M. Best has affirmed the FSR of A+ (Superior) and the ICR of “aa” of GEICO Marine Insurance Company (GEICO Marine) (Annapolis, MD). A.M. Best also has affirmed the ICR of “aaa” as well as the issue rating of “aaa” on $150 million 7.35% senior unsecured debentures, due 2023, of the immediate parent holding company, GEICO Corporation (Wilmington, DE). The outlook for each rating is stable. (See below for a detailed list of companies and ratings.)

The rating affirmations reflect GEICO’s strong risk-adjusted capitalization, continued operating profitability, brand name recognition and preeminent national market position in the personal automobile segment. GEICO’s solid operating results reflect a considerable underwriting expense advantage, driven by its direct distribution business model. In addition, the group continues to produce favorable loss experience while benefiting from a steady stream of investment income. As a result, GEICO’s substantial capital growth over the most recent five-year period has comfortably supported the steady growth in premiums.

All ratings also recognize the considerable resources and financial strength of GEICO Corporation’s parent company, National Indemnity Company (NICO), as well as its ultimate parent, Berkshire Hathaway Inc. (Berkshire) (Omaha, NE) [NYSE: BRKa and BRKb], whose financial profile includes approximately $262 billion of stockholders’ equity at March 31, 2016, modest debt and a long history of strong profitability. Moreover, GEICO Corporation maintains minimal financial leverage and sufficient cash flows to fund fixed charges.

Negative rating factors include GEICO’s high investment leverage derived from its significant allocation of invested assets to unaffiliated equities, which could lead to fluctuations in its risk-adjusted capitalization due to market swings or potential stock market downturns. In addition, GEICO maintains a modest geographic concentration that exposes it to legislative changes and judicial decisions, as its top five states account for slightly more than half of its direct premiums written. However, this risk is largely mitigated by GEICO’s geographic spread throughout the United States and management’s proven ability to quickly adapt to changing market conditions.

A.M. Best believes that the members of GEICO are well-positioned at their current rating levels. However, if deteriorating underwriting results or a financial market downturn leads to a significant decline in risk-adjusted capital, negative pressure may be exerted on the ratings.

The rating affirmations reflect GEICO Marine’s solid risk-adjusted capitalization and historical ocean marine specialty niche expertise. Beginning in 2015, GEICO Corporation became the direct parent of Boat America Corporation and the indirect parent of GEICO Marine, which was previously known as Seaworthy Insurance Company. Berkshire remains the ultimate parent of GEICO Marine. The ratings also recognize GEICO Marine’s significant quota share participation with NICO and explicit commitment provided by Berkshire and similarly under GEICO, for which GEICO Marine receives rating enhancement.

The ratings of GEICO Marine may come under pressure if capitalization weakens; if its operating performance trends do not improve; or if the company’s role/importance within the GEICO organization were to change. The ratings could see positive movement from an improved earnings trend that leads to further capital appreciation without excessive growth.

The FSR of A++ (Superior) and the ICRs of “aaa” have been affirmed for the following members of Government Employees Group:


  • Government Employees Insurance Company

  • GEICO Indemnity Company

  • GEICO Casualty Company

  • GEICO General Insurance Company

  • GEICO Advantage Insurance Company

  • GEICO Choice Insurance Company

  • GEICO Secure Insurance Company

  • GEICO County Mutual Insurance Company

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 see A.M. Best’s Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.


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