A.M. Best Co. has undertaken a rating action on a number of
units under North American Casualty Group ("NAC") - a group
of companies under Applied Underwriters, Inc. - which in turn is a
Berkshire Hathaway Inc.
) wholly owned subsidiary, National Indemnity Company.
The rating action includes reiteration of the financial strength
rating (FSR) of A+ and the issuer credit ratings (ICR) of
"aa-" of the member companies of NAC including California
Insurance Company, Continental Indemnity Company, Illinois
Insurance Company and Pennsylvania Insurance Company.
The rating agency acknowledges the vast operational scale of NAC
units which primarily write workers' compensation insurance.
Strengths of the company that drove the positive rating action
include consistent generation of operating profitability which
testifies to its seasoned management team. The company also boasts
disciplined pricing and reserving philosophy. It has strong
strategic plans in place, which would translate to long-term
NAC also enjoys direct and indirect benefits from being part of the
conglomerate Berkshire Hathaway, which boasted $227.6 billion in
stockholders' equity as of the first quarter ended Mar 31.
Nevertheless, a cause of concern for the rating agency is the
unit's limited operating performance, and high business and
concentration risk due to its specialization in writing significant
workers' compensation business, that too within a limited
geographic area. Though this geographic concentration exposes the
company to heightened regulatory, judicial, legislative and
competitive risks, the rating agency positively views the company's
flexibility to deal with new changes.
The ratings carry a stable outlook. A.M. Best is unlikely to make
any rating change in the near term. A negative rating action,
however, may follow in case the capital position weakens and
operating profitability degrades down to a level which is not
supported by the ratings.
Financial strength and credit ratings, which intend to measure a
company's ability to meet policyholder obligations, are important
factors affecting public confidence and creditworthiness of a
company, and hence its competitiveness. Securing an investment
grade debt rating with a stable outlook reflects optimism on the
Berkshire Hathaway carries a Zacks Rank #2 (Buy). Other players
from the same industry such as
Allied World Assurance Company Holdings, AG
AmTrust Financial Services, Inc.
Aspen Insurance Holdings Ltd.
) are also worth considering. All these stocks sport a Zacks Rank
#1 (Strong Buy).
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BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
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