JUNE 18, 2012 12:00 AM (EDT)

A.M. Best Affirms and Assigns Ratings to the Members of GEICO

Raymond Thomson, ARM
Senior Financial Analyst
(908) 439-2200, ext. 5621

Greg Williams
Managing Senior Financial Analyst
(908) 439-2200, ext. 5815

Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


OLDWICK, N.J. - JUNE 18, 2012 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 these ratings is stable. Concurrently, A.M. Best has assigned an FSR of A++ (Superior) and ICRs of “aaa” to GEICO Advantage Insurance Company (GEICO Advantage), GEICO Choice Insurance Company (GEICO Choice) and GEICO Secure Insurance Company (GEICO Secure). The outlook assigned to these ratings is stable. All companies are domiciled in Omaha, NE, except where specified. (See below for a detailed list of companies and ratings.)

The affirmations reflect GEICO’s solid risk-adjusted capitalization, continued strong operating performance, brand name recognition and preeminent national market position in the personal automobile segment. GEICO’s 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.

The ratings of GEICO Advantage, GEICO Choice and GEICO Secure reflect the benefits derived from utilizing the same infrastructure, platform and personnel of GEICO. As a result, it is expected that the operating performance and risk-adjusted capital position of these companies will be commensurate with the other members of GEICO.

All ratings also recognize the considerable resources and financial strength of GEICO Corporation’s 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 $165 billion of stockholders’ equity at December 31, 2011, minimal debt and a long history of strong profitability. Moreover, GEICO Corporation maintains modest financial leverage and strong cash flows to fund fixed charges.

GEICO’s negative rating factors include high investment leverage derived from its significant allocation of invested assets to unaffiliated equities, which could lead to fluctuation in 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 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. 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

The FSR of A++ (Superior) and ICR of “aaa” have been assigned to the following members of Government Employees Group:

- GEICO Advantage Insurance Company

- GEICO Choice Insurance Company

- GEICO Secure Insurance Company

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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.

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