JUNE 14, 2013 12:00 AM (EDT)
A.M. Best Affirms Ratings of the Members of GEICO and GEICO Corporation
Raymond Thomson, ARe, ARM
Senior Financial Analyst
(908) 439-2200, ext. 5621
Managing Senior Financial Analyst
(908) 439-2200, ext. 5815
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 14, 2013 12:00 AM (EDT)
A.M. Best Co.· has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of aaa of the members of Government Employees Group· (GEICO) (Chevy Chase, MD). A.M. Best also has affirmed the ICR of aaa as well as the debt 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 all ratings is stable. (See below for a detailed list of companies and ratings.)
The rating affirmations reflect GEICOs solid risk-adjusted capitalization, continued strong operating performance, brand name recognition and preeminent national market position in the personal automobile segment. GEICOs strong 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 solid stream of investment income. As a result, GEICO has generated substantial capital over the previous five-year period, which has supported steady growth in premiums and enabled it to pay significant dividends to GEICO Corporation.
All ratings also recognize the considerable resources and financial strength of GEICO Corporations parent company, National Indemnity Company, as well as its ultimate parent, Berkshire Hathaway Inc.· (Omaha, NE) [NYSE: BRKa and BRKb], whose financial profile includes approximately $187 billion of stockholders equity at December 31, 2012, minimal debt and a long history of strong profitability. Moreover, GEICO Corporation maintains modest financial leverage and strong cash flows to fund fixed charges.
GEICOs negative rating factors include 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, as evidenced by the stock market downturn in 2008. In addition, GEICO maintains a modest geographic concentration that exposes it to legislative changes and judicial decisions, as its top five states account for approximately half of its direct premiums written. However, this risk is largely mitigated by GEICOs geographic spread throughout the United States and managements 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. If either deteriorating underwriting results or an equities market downturn result in a significant decline in risk-adjusted capital, negative rating pressure would be exerted on the ratings.
The FSR of A++ (Superior) and 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
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the worlds oldest and most authoritative insurance rating and information source.