A.M. Best Affirms Ratings of Berkshire Hathaway GUARD Insurance Companies’ (Formerly GUARD Insurance Group) Members

A.M. Best has affirmed the financial strength rating of A+ (Superior) and issuer credit ratings of “aa-” of NorGUARD Insurance Company, AmGUARD Insurance Company, EastGUARD Insurance Company and WestGUARD Insurance Company, which operate under an intercompany pooling agreement. These companies are members of Berkshire Hathaway GUARD Insurance Companies (GUARD) and are domiciled in Wilkes-Barre, PA. The outlook for all ratings is stable.

The ratings reflect GUARD’s solid capitalization, favorable operating profitability achieved through disciplined underwriting initiatives, as well as the cautious manner initial claim reserves are established, which has resulted in favorable reserve development in recent years. The ratings also acknowledge the implicit and explicit financial support provided by GUARD’s ultimate parent, Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK.A and BRK.B], and Berkshire’s subsidiary, National Indemnity Company (NICO), including significant reinsurance transactions.

Partially offsetting these positive rating factors are the group’s above-average growth over the past several years and the inherent risks associated with integrating new product lines and expanding into new states, which is compounded by the current soft underwriting cycle, generally weak macroeconomic conditions and a degree of concentration in several states and significant production sources. Also, the group’s net investment ratio is below the workers’ compensation composite and comparably rated peers. Despite these concerns, the outlook reflects GUARD’s enhanced financial flexibility provided by Berkshire, strong balance sheet and historical underwriting profitability.

A.M. Best believes GUARD is well positioned at its current rating level. However, the outlook for its ratings could come under pressure should soft market conditions and a lack of underwriting discipline in its product lines and expansion initiatives result in a decline in underwriting and overall profitability to levels underperforming its peers, or should Berkshire fail to provide adequate financial and operational support.

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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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