OCTOBER 12, 2020 10:52 AM (EDT)
AM Best Affirms Credit Ratings of Members of GEICO, GEICO Corporation and Its Affiliate
|Adib Nassery |
Senior Financial Analyst
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Manager, Public Relations
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Director, Public Relations
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FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 12, 2020 10:52 AM (EDT)
AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aaa” for the members of Government Employees Group (GEICO) (Chevy Chase, MD). AM Best also has affirmed the Long-Term ICR of “aaa”, as well as the Long-Term Issue Credit Rating of “aaa” on $150 million 7.35% senior unsecured debentures, due 2023, of the immediate parent holding company, GEICO Corporation (Wilmington, DE). In addition, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa” of GEICO Marine Insurance Company (GEICO Marine) (Chevy Chase, MD). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list of the companies and ratings.)
The ratings of GEICO reflect the group’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, very favorable business profile and appropriate enterprise risk management (ERM).
The ratings also reflect GEICO’s robust capitalization, consistent track record of operating profitability, brand name recognition and pre-eminent national market position in the personal automobile insurance 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 generally favorable loss experience while benefiting from a steady stream of investment income, and capital gains in its investment portfolio given the favorable performance of equity markets in 2019 and prior years. The overall impact of the volatility in the equity markets during the first half of 2020 was minimal as the group’s investment portfolio is actively managed in conjunction with its ultimate parent, Berkshire Hathaway Inc. (Berkshire) [NYSE: BRKa and BRKb].
Furthermore, these ratings continue to benefit from explicit support provided by GEICO Corporation’s parent company, National Indemnity Company (NICO), as well as implicit support from Berkshire, whose financial profile included approximately $397.3 billion of stockholders’ equity at June 30, 2020, 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 ratings of GEICO Marine reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, favorable business profile and appropriate ERM.
The ratings also reflect GEICO Marine’s supportive risk-adjusted capitalization, historical ocean marine specialty niche expertise and the explicit support provided by NICO, in the form of significant quota share reinsurance coverage with NICO, and for which GEICO Marine receives rating enhancement. Additionally, the ratings recognize the implicit commitment provided by Berkshire.
The FSR of A++ (Superior) and the Long-Term ICRs of “aaa” 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 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 analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.