OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” of Berkshire Hathaway Homestate Insurance Company (Omaha, NE) and its five property/casualty affiliates. These companies are referred to collectively as Berkshire Hathaway Homestate Companies (BHHC). The outlook of these Credit Ratings (ratings) remain stable. (See below for a detailed listing of companies.)
The ratings reflect BHHC’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also reflect BHHC’s strong risk-adjusted capitalization, historically profitable operating performance, aggressive claims management, conservative loss reserving and the executive team’s successful track record in managing operations. Additionally, these ratings consider the additional financial flexibility and support provided by the group’s publicly traded parent and ultimate shareholder, Berkshire Hathaway Inc. [NYSE: BRK A and BRK B].
The positive rating factors are offset somewhat by challenging market conditions and its business profile, which remain somewhat concentrated in the workers’ compensation line, primarily in California. Approximately 59% of direct writings in 2018 were from California. This concentration exposes the group to a heightened level of regulatory, judicial, legislative and competitive risks relative to its peers. An additional offsetting rating factor is the risk associated with a large investment allocation in equity securities, as common stocks made up approximately 94% of policyholders’ surplus at year-end 2018, thus remaining a potential source of volatility in earnings and capital appreciation. Despite these concerns, the rating outlooks reflect the group’s strong risk-adjusted capitalization, proven operating performance, management’s ability to adapt quickly to changing market conditions, efforts to diversify into other states and into other lines of business, and the long-term support of Berkshire Hathaway Inc., particularly in the management of the group’s investment portfolio.
While the group is well-positioned at the current rating level, negative rating actions could result if operating performance falls significantly short of AM Best’s expectations, if there is considerable deterioration in risk-adjusted capitalization, or if AM Best determines that the strategic importance of the group no longer warrants rating enhancement.
The FSR of A++ (Superior) and the Long-Term ICR of “aa+” have been affirmed with a stable outlook for Berkshire Hathaway Homestate Insurance Company and its following property/casualty affiliates:
- Cypress Insurance Company (San Francisco, CA)
- Oak River Insurance Company (Omaha, NE)
- Redwood Fire and Casualty Insurance Company (Omaha, NE)
- Brookwood Insurance Company (North Liberty, IA)
- Continental Divide Insurance Company (Denver, CO)
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.
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