A.M. Best Affirms Ratings of GUARD Members

March 21, 2019

AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings of “aa-” of WestGUARD Insurance Company, AmGUARD Insurance Company, EastGUARD Insurance Company and NorGUARD Insurance Company, which operate under an intercompany pooling agreement. These companies are members of Berkshire Hathaway GUARD Insurance Companies (GUARD) and domiciled in Wilkes-Barre, PA. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect GUARD’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

GUARD’s solid risk-adjusted capitalization, continued and favorable operating profitability achieved through disciplined underwriting initiatives and conservative reserving philosophy, which has resulted in favorable reserve development over the past 11 years, also were factors taken into account. The ratings also acknowledge the implicit and explicit financial support provided by GUARD’s immediate parent, National Indemnity Company (NICO), including significant reinsurance transactions. NICO is a subsidiary of Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK A and BRK B].

Partially offsetting these positive rating factors are the group’s above-average growth in its core workers’ compensation line and other commercial classes over the past several years. While profitable growth is welcome when it adds to surplus growth and business continuity – and GUARD has been deliberate and measured in its approach to the market – there is greater inherent risk associated with integrating new product lines and expansion into new states. In addition, there is a degree of risk as it regards the concentration in several states and production sources; however, GUARD has mitigated these risks through diversification. Despite these concerns, the outlooks reflect GUARD’s enhanced financial flexibility provided by Berkshire, solid balance sheet and historical underwriting profitability.

AM Best believes GUARD’s operating companies are well-positioned at the current rating level. However, these ratings could come under pressure should softer market conditions occur in their new product lines and expansion initiatives result in a decline in underwriting and overall profitability to levels underperforming their peers, or if a significant, sudden reduction in surplus results from losses in the investment portfolio, which has a significant allocation to equity holdings.

In addition, the ratings could be under pressure should NICO cease to provide adequate financial and operational support.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

Source: AM Best