Oldwick, NJ -(BusinessWire)- AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” (Superior) of Berkshire Hathaway Homestate Insurance Company (Omaha, NE) and its five property/casualty affiliates. These companies collectively are referred to as Berkshire Hathaway Homestate Companies (BHHC). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of companies.)
The ratings reflect BHHC’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also reflect BHHC’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), historically profitable operating performance, conservative loss reserving and the executive team’s successful track record in managing operations. AM Best notes that BHHC’s key operating metrics consistently outperform peer benchmarks, particularly when the group’s superior long-term investment results are considered. 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 remains modestly concentrated in the workers’ compensation line of business, primarily in California. Approximately half of BHHC’s direct writings in 2020 were derived from California. This concentration has reduced over time, as the group has seen its California workers’ compensation business contract due to heightened competition that has persisted for several years. This decline has been accompanied by diversifying its workers’ compensation book outside of California and strong growth in other business classes, including commercial auto and property lines. Nevertheless, the large block of California workers’ compensation business still 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, which remains a potential source of volatility in earnings and capital appreciation.
The FSR of A++ (Superior) and the Long-Term ICR of “aa+” (Superior) 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)
- BHHC Special Risks 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 Guide to Best’s Credit Ratings (PDF). 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 (PDF).
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