A.M. Best Removes Ratings Of North American Casualty Group And Its Members From Under Review

A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of A (Excellent) and issuer credit ratings of “a” of North American Casualty Group (NAC) and its members, California Insurance Company (San Francisco, CA) and Continental Indemnity Company (Cedar Rapids, IA), which operate under a pooling arrangement. The outlook assigned to all ratings is stable.

On November 6, 2009, A.M. Best placed the ratings on all rated members of Berkshire Hathaway Inc. (Berkshire) [NYSE: BRK.A and BRK.B] under review with negative implications as a result of the Berkshire acquisition of the remaining 77% of Burlington Northern Santa Fe (BNSF) railroad, which was not already owned. The under review status reflected A.M. Best’s concerns regarding the potential utilization of Berkshire’s insurance and reinsurance operations as a funding source for the transaction given the size of the acquisition. Additionally, A.M. Best was concerned with the potential liquidity impact on some of the insurance and reinsurance operations given their exposure to high severity events. Based on a review of the group’s financial position as of December 31, 2009 and following the close of the BNSF acquisition, A.M. Best’s concerns have been largely mitigated or resolved.

The ratings reflect the group’s strong capitalization and the favorable historical underwriting performance of business produced by its parent, Applied Underwriters, Inc. (Applied), a leading provider of bundled workers’ compensation insurance and payroll processing services to small and medium-sized businesses. The ratings also acknowledge management’s conservative operating philosophy, along with its strategic business plans and projections that call for near-term earnings and capital accumulation. In addition, A.M. Best anticipates that Applied will continue to support NAC with additional capital contributions as necessary, allowing the group to maintain a level of risk-adjusted capitalization that remains supportive of its rating. Lastly, the ratings also recognize the additional financial flexibility and support provided by its publicly traded ultimate parent, Berkshire Hathaway Inc.