AM Best Affirms Credit Ratings of National Indemnity Company and Its Affiliates
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Insights
The affirmation of the Financial Strength Rating (FSR) of A++ (Superior) and Long-Term Issuer Credit Ratings (Long-Term ICR) of 'aaa' (Exceptional) for National Indemnity Company and its affiliates, subsidiaries of Berkshire Hathaway Inc., signifies a robust financial position and stability. This is a key indicator for investors as it reflects a company's ability to meet its policyholder obligations and suggests a strong risk-adjusted capitalization. The stable outlook attached to these ratings implies that the company is expected to maintain this position in the foreseeable future.
From an investment perspective, these ratings can influence investor confidence, potentially affecting the stock prices of Berkshire Hathaway. High credit ratings often correlate with lower borrowing costs and an enhanced ability to attract capital. In the context of National Indemnity, a subsidiary of a diversified conglomerate like Berkshire Hathaway, this can also reflect the financial synergies and support available within the group.
The report highlights the balance sheet strength of National Indemnity, which is critical for assessing the company's resilience to financial stressors. The company's risk management practices, particularly in maintaining ample liquidity and leveraging the financial resources of Berkshire Hathaway, mitigate potential volatility from investment fluctuations. For stakeholders, this indicates a well-managed approach to risk that can safeguard investments and policyholder interests over time.
Furthermore, the reference to National Indemnity's very favorable business profile and appropriate enterprise risk management (ERM) practices suggests a strategic alignment with industry best practices. This is particularly relevant for long-term investors who seek companies with robust ERM frameworks capable of adapting to changing market conditions and emerging risks.
The outperformance of AM Best’s reinsurance composite by National Indemnity, as indicated by a range of profitability metrics, signals operational excellence within the reinsurance sector. This is significant as it suggests that the company has been able to effectively manage its underwriting risks and capitalize on investment opportunities more successfully than its peers. Such performance can be a bellwether for industry trends, providing insights into the competitive dynamics and potential for market share gains.
The mention of quota share and excess of loss reinsurance agreements with affiliates underlines the strategic intra-group collaborations that enhance the overall risk profile and financial stability of the company. These arrangements can lead to efficient capital management and risk diversification, which are important considerations for investors looking at the insurance sector.
The ratings of National Indemnity reflect its balance sheet strength, which AM Best assesses as strongest, as well as its very strong operating performance, very favorable business profile and appropriate enterprise risk management (ERM).
National Indemnity’s balance sheet strength benefits from its solid risk-adjusted capitalization, which is typically maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), but is subject to occasional volatility, usually due to fluctuations in investment values. This volatility is mitigated by ample liquidity and vast financial resources, not only at National Indemnity’s level, but also at National Indemnity’s ultimate parent, Berkshire. Berkshire provides substantial financial flexibility, diversification and long-term competitive advantages associated with its non-insurance businesses, in addition to the benefit of Berkshire’s proven investment acumen.
National Indemnity’s steady underwriting performance has been augmented by substantial investment contributions during most periods, which has led to operating results that have outperformed AM Best’s reinsurance composite, as measured by a broad range of profitability metrics, over a prolonged time period. National Indemnity’s underwriting results in large part reflect the performance of Berkshire’s other (re)insurance affiliates, as a substantial portion of the group’s premiums are assumed via quota share and to a lesser extent excess of loss reinsurance agreements with affiliates.
The FSR of A++ (Superior) and the Long-Term ICRs of “aaa” (Exceptional) have been affirmed with stable outlooks 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
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.
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Gregory Dickerson
Director
+1 908 882 1737
gregory.dickerson@ambest.com
Christopher Sharkey
Associate Director, Public Relations
+1 908 882 2310
christopher.sharkey@ambest.com
Carlos Wong-Fupuy
Senior Director
+1 908 882 2438
carlos.wong-fupuy@ambest.com
Al Slavin
Senior Public Relations Specialist
+1 908 882 2318
al.slavin@ambest.com
Source: AM Best
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