NOVEMBER 22, 2022 11:29 AM (EST)
AM Best Affirms Credit Ratings of Members of GEICO and GEICO Corporation
Senior Financial Analyst
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FOR IMMEDIATE RELEASE
OLDWICK - NOVEMBER 22, 2022 11:29 AM (EST)
AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aaa” (Exceptional) for the members of Government Employees Group (GEICO) (Chevy Chase, MD). AM Best also has affirmed the Long-Term ICR of “aaa” (Exceptional), as well as the Long-Term Issue Credit Rating of “aaa” (Exceptional) on $150 million 7.35% senior unsecured debentures, due 2023, of the immediate parent holding company, GEICO Corporation (Wilmington, DE). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list of the companies and ratings.)
The ratings reflect GEICO’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, very favorable business profile and appropriate enterprise risk management.
The ratings also reflect GEICO’s robust capitalization, historical track record of operating profitability, brand name recognition and preeminent national market position in the personal automobile insurance segment. The group has reported strong capital growth over the long term largely driven by capital appreciation and operating earnings. However, the group’s surplus declined as of Sept. 30, 2022, driven primarily by unrealized capital losses stemming from the volatility in the equity markets, as well as deteriorating underwriting results driven by the impact of increased claims severities due to supply chain and inflationary issues, which began to accelerate in the second half of 2021 and has continued through 2022. Management has taken steps to improve the group’s underwriting results by implementing multiple initiatives namely rate increases. GEICO’s operating results reflect a considerable underwriting expense advantage, driven by its direct business model. In addition, the group continues to produce generally favorable loss experience while benefiting from a steady stream of investment income, and historical capital gains in its investment portfolio. The group’s investment portfolio is managed actively in conjunction with its ultimate parent, Berkshire Hathaway Inc. (Berkshire) [NYSE: BRKa and BRKb].
Furthermore, the ratings continue to benefit from explicit support provided by GEICO Corporation’s parent company, National Indemnity Company, as well as implicit support from Berkshire, whose financial profile included approximately $463.7 billion of stockholders’ equity at Sept. 30, 2022, modest debt and a long history of strong profitability. Moreover, GEICO Corporation maintains minimal financial leverage and sufficient cash flows to fund fixed charges.
The FSR of A++ (Superior) and the Long-Term ICRs of “aaa” (Exceptional) have been affirmed with stable outlooks for the following members of Government Employees Group:
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.