Press Release - DECEMBER 07, 2017
A.M. Best Affirms Credit Ratings of Berkshire Hathaway Inc.’s Subsidiaries
FOR IMMEDIATE RELEASE
OLDWICK - DECEMBER 07, 2017
The ratings reflect National Indemnity’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its very strong operating performance, very favorable business profile and appropriate enterprise risk management.
National Indemnity’s management team continues to be adept at managing the underwriting cycle and has the financial resources and acumen, which places the company in a strong position to seize unique opportunities. This distinguishing aspect and its superior market profile provide National Indemnity with the ability to outperform the market in terms of underwriting performance. Furthermore, the ratings reflect the benefits of being part of Berkshire, which includes the proven investment acumen of Mr. Warren Buffett with this expertise relied upon heavily to augment the returns of the organization. In addition, Berkshire provides substantial financial flexibility, diversification and long-term competitive advantages associated with Berkshire’s non-insurance businesses.
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 remain 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 regard 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 risk-adjusted capitalization is at the strongest level, the 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 there is a series of operating losses over several years that exceeds A.M. Best’s expectations or there is a material change in the financial strength and flexibility of the group’s ultimate parent, Berkshire.
The FSR of A++ (Superior) and the Long-Term ICRs of “aaa” have been affirmed for National Indemnity Company and its following affiliates:
The following Long-Term IR has been affirmed:
Finial Holdings, Inc.
— “bbb-” on $200 million 7.125% senior unsecured notes, due 2023
This press release relates to Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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