S&P Affirms Berkshire Hathaway Insurance Units’ Ratings

Standard & Poor’s Ratings Services has affirmed its ‘AA+’ financial strength and long-term counterparty credit ratings on Berkshire Hathaway Inc.’s (BRK) operating insurance subsidiaries.

The ratings apply to National Indemnity Co., Government Employees Insurance Co., General Reinsurance Corp., all related core insurance subsidiaries as well as all Berkshire Hathaway Insurance Subsidiaries (BRKIS). S&P’s said its outlook for these entities is stable.

S&P said it removed these ratings from CreditWatch Negative where they were placed initially on Aug. 11, 2015 over uncertainty regarding the amount of capital that the ultimate parent might dividend from its insurance operating subsidiaries to help fund its acquisition of Precision Castparts Corp. (PCP).

At the same time, S&P affirmed its ‘AA’ long-term counterparty credit and senior unsecured debt ratings on BRK’s intermediate insurance holding companies, General Re Corp., GEICO Corp., and General Re Financial Products Corp. It also affirmed its ‘A-1+’ short-term rating on General Re Corp. and removed these ratings from CreditWatch Negative where they were placed initially on Aug. 11, 2015. This outlook is stable also.

S&P said ultimately BRK funded the January 2016 acquisition of PCP through a combination of increased leverage at the holding company and cash resources from several of its subsidiaries. The amount of dividends removed from the insurance operating subsidiaries to help fund the acquisition was lower than S&P had originally anticipated, with capital metrics at the insurance companies remaining in line with its expectation for those ratings.

“The affirmation of our financial strength ratings on BRKIS incorporates our view that the operating insurance subsidiaries maintain consolidated capital adequacy modestly in the extremely strong range on a prospective basis, and a very strong capital and earnings profile that supports our ratings,” said Standard & Poor’s credit analyst Laline Carvalho.

S&P analysts said the financial strength ratings on BRKIS reflect BRKIS’s “excellent business risk profile and very strong financial risk profile” as well as their “relative competitive position and outperformance relative to peers.”

S&P said the stable outlook reflects its view that these companies will maintain very strong capital and earnings supported by strong earnings generation for the next two to three years.

Source: Standard & Poor’s