Best’s News & Research Service - December 11, 2019 12:43 PM (EST)
AM Best Affirms Credit Ratings of Berkshire Hathaway Inc.’s Subsidiaries
- December 11, 2019 12:43 PM (EST)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aaa” of National Indemnity Company (Omaha, NE) and its affiliates (collectively referred to as National Indemnity). Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of Finial Reinsurance Company (Stamford, CT), as well as the Long-Term ICR of “bbb-” and the Long-Term Issue Credit Rating (Long-Term IR) of “bbb-” of Finial Holdings, Inc. (Delaware). AM Best also has affirmed the FSR of A++ (Superior) and the Long-Term ICR of “aa+” of Berkshire Hathaway Life Insurance Company of Nebraska (BHLN), and the FSR of A+ (Superior) and the Long-Term ICR of “aa-” of First Berkshire Hathaway Life Insurance Company (Flushing, NY). These companies are all subsidiaries of Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK A and BRK B]. The outlook of these Credit Ratings (ratings) is stable. All companies are headquartered in Omaha, NE, unless otherwise specified. (See below for a detailed listing of the companies and ratings.)
The ratings of National Indemnity reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its very strong operating performance, very favorable business profile and appropriate enterprise risk management (ERM).
National Indemnity’s management team continues to manage the underwriting cycle successfully, and maintains extensive financial resources and expertise that places the company in a strong position to seize unique market opportunities. Furthermore, the ratings reflect the benefits of being part of Berkshire, which includes the proven investment acumen of its CEO, Warren Buffett, thereby significantly enhancing the total 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 compared with other players in the market. These higher levels of equity investments can result in volatility in the company’s results; however, AM Best’s concern is alleviated somewhat by the superior long-term performance of the group’s investment portfolio.
The importance of Mr. Buffett as CEO to the entire Berkshire organization, is undisputable given how he historically has controlled investments and capital allocation within the firm. Although succession remains a slight concern, AM Best believes there are very strong internal candidates to succeed Mr. Buffett and perpetuate Berkshire’s corporate strategy, culture and decentralized operating structure, which will facilitate a successful transition in management when it occurs.
National Indemnity’s ratings could experience negative rating actions if there is a series of operating losses over several years that exceeds AM Best’s expectations, or if there is a material change in the financial strength and flexibility of the group’s ultimate parent, Berkshire.
The ratings of BHLN reflect its balance sheet strength, which AM Best categorizes as strongest, as well its adequate operating performance, limited business profile and appropriate ERM.
The balance sheet assessment recognizes BHLN’s strongest level of risk-adjusted, 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, exposure to interest sensitive business and its heavy concentration in affiliated non-insurance investments.
The FSR of A++ (Superior) and the Long-Term ICRs of “aaa” have been affirmed for National Indemnity Company and its following affiliates:
- Columbia Insurance Company
- National Fire & Marine Insurance Company
- National Liability & Fire Insurance Company
- National Indemnity Company of Mid-America
- National Indemnity Company of the South
- Berkshire Hathaway Specialty Insurance Company
- Berkshire Hathaway Direct Insurance Company
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 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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.