JUNE 11, 2015 02:14 PM (EDT)

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


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

Gary Davis
Assistant Vice President
(908) 439-2200, ext. 5665
gary.davis@ambest.com

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

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

FOR IMMEDIATE RELEASE

OLDWICK - JUNE 11, 2015 02:14 PM (EDT)
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). 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 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 past 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, as well as its ultimate parent, Berkshire Hathaway Inc. (Omaha, NE) [NYSE: BRKa and BRKb], whose financial profile includes approximately $245 billion of stockholders' equity at March 31, 2015, 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 either deteriorating underwriting results or a financial market downturn result in a significant decline in risk-adjusted capital, negative rating pressure may be exerted on the ratings.

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

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 .

Key insurance criteria reports utilized:


  • Rating Members of Insurance Groups

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for Property/Casualty Insurers

  • Insurance Holding Company and Debt Ratings

  • Equity Credit for Hybrid Securities

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.

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


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