Berkshire Hathaway Insurance Grp 'AAA' CPA Afmd by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/2/97 --Standard & Poor's today affirmed its triple-`A' claims-paying ability and counterparty credit ratings on members of the Berkshire Hathaway Berkshire Hathaway (NYSE: BRKA, NYSE: BRKB) is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that oversees and manages a number of subsidiary companies. Insurance Group (see list). The rating is based on the group's superior capital base, excellent business positions of rating family member GEICO GEICO Government Employees Insurance Company Corp. and group member National Indemnity Co., and strong management under the leadership of Warren Buffett Warren Buffett Known as "the Oracle of Omaha," Buffett is Chairman of Berkshire Hathaway and arguably the greatest investor of all time. His wealth fluctuates with the performance of the market, but for the last few years he has been reported to be worth over $30 billion, making . The overwhelmingly strong capital base provides as a cushion against catastrophe risk and more than offsets the investment risks associated with holding unusually large and relatively undiversified common stock holdings. MAJOR RATING FACTORS: -- Superior Capitalization: With a surplus base of $26.1 billion at year-end 1996, Berkshire Hathaway is able to opportunistically capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. market opportunities such as the California Earthquake Authority Established in September 1996 by the California Legislature, the California Earthquake Authority is a privately funded, publicly managed organization that sells California earthquake insurance policies through participating insurance companies. . Standard & Poor's capital model shows capital adequacy to be superior at 732%. -- Excellent business position of its operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. : GEICO and National Indemnity continue to maintain market leadership in their respective insurance and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. niches. -- Strong Management: Standard & Poor's believes that Warren Buffet's success can be attributed as much to his investment strategy as his ability to pick effective managers for his insurance operations. -- Investment leverage: At year-end 1996, equities represented 73.2% of invested assets and 92.5% of surplus. The majority of this equity portfolio is invested in eight large capital stocks. Standard & Poor's believes that Berkshire's strong capital base combined with Warren Buffet's long-term commitments to his investments more than offsets the aggressive investment leverage. -- Catastrophe risks: Due to the specialty nature of National Indemnity's business, Standard & Poor's believes that Berkshire Hathaway's operating results are vulnerable to large catastrophic events. The company's strong capital base, however, provides sufficient cushion to offset its $1 billion pretax probable maximum loss Probable Maximum Loss (PML) The anticipated value of the largest loss that could result from the destruction and the loss of use of property, given the normal functioning of protective features (firewalls, sprinklers, and a responsive fire department, among others, in the . -- Modest Premium Growth: Except for 1996, which included the premiums from the GEICO acquisition, Berkshire Hathaway's premiums have grown at an average rate of about 1% since 1994. Standard & Poor's believes that Berkshire's strong investment performance allows it to exercise discipline in soft underwriting cycles. EXPECTATIONS -- Premium growth: Growth in GEICO's standard and nonstandard non·stan·dard adj. 1. Varying from or not adhering to the standard: nonstandard lengths of board. 2. segments should contribute to overall premium growth of 5%-6%. -- Catastrophe exposure: National Indemnity's "super-cat" business will continue to be a source of operating volatility for Berkshire. -- Surplus growth: Underwriting profitability and strong investment performance should continue to contribute to healthy surplus growth. -- Minimal financial leverage: Despite unlimited access to the debt markets, Berkshire Hathaway will continue to maintain a very conservative financial profile, Standard & Poor's said. -- CreditWire OUTLOOK: STABLE Standard & Poor's expects Berkshire Hathaway Insurance Group to continue to generate strong earnings that will contribute to heathly surplus growth. -- CreditWire -0- GROUP MEMBERS: Aksarben Life Insurance Co. Berkshire Hathaway Life Insurance Co. of NE Central States Indemnity Co. of Omaha Columbia Insurance Co. Continental Divide Insurance Co. Cornhusker Casualty Co. Cypress Insurance Co. National Fire & Marine Insurance Co. National Indemnity Co. National Indemnity Co. of Mid-America National Indemnity Co. of the South National Liability & Fire Insurance Co. Redwood Fire & Casualty Insurance Co. Wesco-Financial Insurance Co. CONTACT: Vandana Sharma, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-8924 Robert G Partridge partridge, common name applied to various henlike birds of several families. The true partridges of the Old World are members of the pheasant family (Phasianidae); the common European or Hungarian species has been successfully introduced in parts of North America. , New York (1) 212-208-8551 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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