JUNE 05, 2003 12:00 AM (EDT)
A.M. Best Affirms GEICO's Financial Strength and Debt Ratings
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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 05, 2003 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating of A++ (Superior) for Government Employees Group (GEICO) (Chevy Chase, MD) and its members. Concurrently, A.M. Best has affirmed the "aaa" debt ratings of GEICO Corporation's existing $100 million 7.5% notes, due 2005 and the $150 million 7.35% debentures, due 2023. The rating outlooks are stable.
These ratings reflect GEICO's superior financial strength, favorable operating performance and brand name recognition. The ratings also recognize the considerable resources and financial strength of its ultimate parent, Berkshire Hathaway Inc., whose profile includes approximately $64 billion of stockholders' equity, minimal debt and a long history of strong profitability. Moreover, the immediate holding company, GEICO Corporation, maintains modest financial leverage and strong cash flows to fund fixed charges.
GEICO's favorable operating results reflect its considerable underwriting expense advantage driven by its direct distribution business model as well as generally favorable loss experience. Returns benefit from GEICO's consistent and stable stream of investment income. Further, the group maintains a strategic advantage due to its leadership position in the government and military employee market, as well as an excellent reputation for providing quality service.
These strengths are modestly offset by GEICO's above average investment leverage as well as its exposure to regulatory issues in several of its larger states. While common stock investment leverage is slightly above its private passenger automobile composite norms, risk-adjusted capitalization and historic success in managing the portfolio mitigate this risk. GEICO maintains a modest geographic concentration with its top four states accounting for approximately 50% of direct written premium. However, this risk is largely offset by the geographic spread throughout the rest of the country and management's proven ability to quickly adapt to changing market conditions.
Based on GEICO's superior capitalization, strong operating performance and considerable market presence, A.M. Best views the rating outlooks as stable.
The financial strength rating of A++ (Superior) has been affirmed for Government Employees Group and the following members:
- Government Employees Insurance Company
- GEICO Indemnity Company
- GEICO Casualty Company
- GEICO General Insurance Company
The following debt ratings have been affirmed:
- "aaa" on $100 million 7.5% notes, due 2005
- "aaa" on $150 million 7.35% debentures, due 2023
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.