AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of aaa for the members of Government Employees Group (GEICO) (Chevy Chase, MD). AM Best also has affirmed the Long-Term ICR of aaa, as well as the Long-Term Issue Credit Rating of aaa on $150 million 7.35% senior unsecured debentures, due 2023, of the immediate parent holding company, GEICO Corporation (Wilmington, DE). In addition, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICR of aa of GEICO Marine Insurance Company (GEICO Marine) (Chevy Chase, MD). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list of the companies and ratings.)
The ratings of GEICO reflect the groups balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, very favorable business profile and appropriate enterprise risk management (ERM).
The ratings also reflect GEICOs robust capitalization, consistent track record of operating profitability, brand name recognition and pre-eminent national market position in the personal automobile insurance segment. GEICOs solid operating results reflect a considerable underwriting expense advantage, driven by its direct distribution business model. In addition, the group continues to produce generally favorable loss experience while benefiting from a steady stream of investment income, and capital gains in its investment portfolio given the favorable performance of equity markets in most years. As a result, GEICOs substantial capital growth over the most recent five-year period has comfortably supported the steady growth in premiums.
Furthermore, these ratings continue to benefit from explicit support provided by GEICO Corporations parent company, National Indemnity Company (NICO), as well as implicit support from its ultimate parent, Berkshire Hathaway Inc. (Berkshire) [NYSE: BRKa and BRKb], whose financial profile included approximately $386.4 billion of stockholders equity at June 30, 2019, modest debt and a long history of strong profitability. Moreover, GEICO Corporation maintains minimal financial leverage and sufficient cash flows to fund fixed charges.
These positive rating factors are offset partially by GEICOs high investment leverage derived from its significant allocation of invested assets to unaffiliated equities, which could lead to fluctuations in its risk-adjusted capitalization due to market swings or potential stock market downturns. In addition, GEICO maintains a modest geographic concentration that exposes it to legislative changes and judicial decisions, as its top five states account for slightly more than half of its direct premiums written. However, this risk is mitigated largely by GEICOs geographic spread throughout the United States and managements proven ability to quickly adapt to changing market conditions.
The ratings of GEICO Marine reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, favorable business profile and appropriate ERM.
The ratings also reflect GEICO Marines supportive risk-adjusted capitalization, historical ocean marine specialty niche expertise and the explicit support provided by NICO, in the form of significant quota share reinsurance coverage, and for which GEICO Marine receives rating enhancement. Additionally, the ratings recognize the implicit commitment provided by Berkshire.
The FSR of A++ (Superior) and the Long-Term ICRs of aaa have been affirmed with stable outlooks for the following members of Government Employees Group:
- Government Employees Insurance Company
- GEICO Indemnity Company
- GEICO Casualty Company
- GEICO General Insurance Company
- GEICO Advantage Insurance Company
- GEICO Choice Insurance Company
- GEICO Secure Insurance Company
- GEICO County Mutual Insurance Company
This press release relates to Credit Ratings that have been published on AM Bests 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 Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.
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Michael T. Venezia
Senior Financial Analyst
+1 908 439 2200, ext. 5034
Jacqalene Lentz, CPA
+1 908 439 2200, ext. 5762
Manager, Public Relations
+1 908 439 2200, ext. 5159
Director, Public Relations
+1 908 439 2200, ext. 5644