Company Website: http://www.ambest.com
OLDWICK, N.J. -- (Business Wire)

A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of “aaa” of National Indemnity Company (Omaha, NE) (National Indemnity) and its affiliates. Concurrently, A.M. Best has affirmed the ICR of “bbb-” and debt rating of “bbb-” of Finial Holdings Inc. (Delaware) as well as the FSR of A- (Excellent) and ICR of “a-” of Finial Reinsurance Company (Stamford, CT). A.M. Best also has affirmed the FSR of A++ (Superior) and ICR of “aa+” of Berkshire Hathaway Life Insurance Company of Nebraska (BHLN). These companies are all subsidiaries of Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK A and BRK B]. The outlook for all ratings is stable. All companies are headquartered in Omaha, NE, unless otherwise specified. (See below for a detailed listing of the companies and ratings.)

The rating affirmations for National Indemnity reflect its consistently superior operating performance, strong risk-adjusted capitalization and market leading business profile. National Indemnity remains a material contributor to Berkshire’s overall operating strategy and ongoing success, while simultaneously benefitting from the relationship with its well known and diversified parent.

National Indemnity continues to outperform the reinsurance composite with very strong operating and total returns. The management team adept at managing the underwriting cycle and has the financial resources and acumen necessary to take advantage of unique opportunities. A.M. Best believes that this distinctive aspect provides National Indemnity with consistently strong underwriting performance and a superior market profile. National Indemnity’s operating performance is enhanced by the investment returns generated by the strategies of its chief executive officer (CEO) Mr. Warren Buffett, whose investment expertise is heavily relied upon to bolster the total returns of the group.

National Indemnity’s risk-based capitalization remains at the superior level despite the series of catastrophic events of 2011. Historically, the company has managed its aggregate risk accumulations conservatively, and as a result risk-based capitalization has continued to remain in the superior range and is able to withstand even a series of shock losses.

Partially offsetting these strengths is National Indemnity’s exposure to higher levels of equity investments as compared to most of its peers. These higher levels of equity investments can result in volatile results as was evidenced during the worldwide economic crises several years ago. However, A.M. Best’s concern is somewhat mitigated by National Indemnity’s investment portfolio’s superior long-term performance and focus on well priced longer-tail business opportunities.

The importance of Mr. Buffett to the entire Berkshire organization and the lack of transparency with regard to his successor definitely pose a risk to the organization and is a continuing concern for A.M. Best. Although A.M. Best believes there are very strong internal candidates to succeed Mr. Buffett as CEO, the lack of clarity in regards to a chosen successor adds a degree of uncertainty to the future direction of the corporation, as Mr. Buffett personally controls the capital allocation within the firm. Nevertheless, A.M. Best believes Berkshire’s corporate strategy, culture and decentralized operating structure will facilitate a successful transition in management when it occurs.

National Indemnity’s ratings could experience negative rating actions if large catastrophic losses in combination with large investment losses decreased its risk-based capitalization below the expectations of A.M. Best or it experiences a series of operating losses over several years that exceed A.M. Best’s expectations.

The ratings of BHLN recognize its acceptable level of risk-adjusted capitalization, positive operating earnings and the implicit and explicit benefits of being part of the Berkshire organization. Partially offsetting these positive rating factors are BHLN’s exposure to below investment grade bonds and its heavy concentration in an affiliated non-insurance common stock investment.

BHLN is well positioned at its current rating level. Key rating drivers that may lead to negative rating actions include a material deterioration in BHLN’s operating performance, lack of capital support from Berkshire or substantial deterioration in its risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR).

The FSR of A++ (Superior) and ICRs of “aaa” have been affirmed for National Indemnity Company and the following affiliates:

• Columbia Insurance Company
• Wesco-Financial Insurance Company
• National Fire & Marine Insurance Company
• National Liability & Fire Insurance Company
• National Indemnity Company of Mid-America
• National Indemnity Company of the South

The following debt rating has been affirmed:

Finial Holdings, Inc.—

-- “bbb-” on $200 million 7.125% senior unsecured notes, due 2023

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; Catastrophe Analysis in A.M. Best Ratings”; Evaluating Non-Insurance Ultimate Parents”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

Contacts:

A.M. Best Co.
Peter Dickey
Assistant Vice President
908-439-2200, ext. 5053
peter.dickey@ambest.com
or
John Andre
Group Vice President
908-439-2200, ext. 5619
john.andre@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best Co.