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Columbia Insurance Company — Moody’s affirms National Indemnity’s Aa1 financial strength rating, stable outlook

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Rating Action:

Moody’s affirms National Indemnity’s Aa1 financial

strength rating, stable outlook

10 December 2021

New York, December 10, 2021 — Moody’s Investors Service has affirmed the Aa1 insurance financial

strength rating of National Indemnity Company (NICO), the lead member of NICO Group, which

encompasses the diversified insurance and reinsurance businesses owned by Berkshire Hathaway

Inc. (Berkshire, long-term issuer rating Aa2 stable, NYSE: BRK-A). Moody’s has also affirmed

the Aa1 insurance financial strength rating of Columbia Insurance Company (Columbia), a sister

company to NICO. The rating outlook for these companies is stable.
RATINGS RATIONALE
The affirmation of the NICO and Columbia ratings reflects NICO Group’s extraordinary capitalization,

its broad range of products and services, and its healthy profitability, according to Moody’s. NICO

Group has the largest capital base of any (re)insurance group in the world. Its diversified operations

include personal auto insurance sold directly to consumers across the US (GEICO), various

property/casualty and related coverages sold through brokers and agents mainly to commercial

clients in the US (Berkshire Hathaway Primary Group), and property/casualty and life/health

reinsurance sold directly and through brokers to clients worldwide (Berkshire Hathaway Reinsurance

Group). NICO Group is the market leader in writing large-dollar, long-tail retroactive reinsurance for

major insurance clients. The group also benefits from Berkshire’s exceptional financial flexibility.
Credit challenges for NICO Group include potential earnings and capital volatility stemming from

its large, concentrated stock investments and large individual underwriting transactions. The group

also has a complex organizational structure, with NICO owning Burlington Northern Santa Fe, LLC

(long-term issuer rating A3 stable), a leading North American railroad and one of Berkshire’s other

major operating segments. NICO Group maintains strong capitalization relative to its (re)insurance

activities, with or without the capital allocated to the railroad, and the railroad pays sizable yearly

dividends to NICO.
Moody’s has also affirmed the Baa3 senior unsecured debt rating of Finial Holdings, Inc., a relatively

small downstream holding company, based on the sound capitalization of its operating subsidiary,

Finial Reinsurance Company, offset by the runoff status of this operation.
Based on Berkshire’s consolidated GAAP results, the (re)insurance businesses reported net income

of $3.9 billion for the first nine months of 2021, down from $4.7 billion in the prior-year period. The

current-year results were hurt by higher catastrophe losses, higher personal auto claim frequency

and severity, higher losses in life reinsurance, and somewhat lower investment income than in

the prior year. Moody’s expects that these (re)insurance businesses will continue to achieve solid

earnings and capital growth over time.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of NICO Group’s ratings is unlikely given its strategic emphasis on high-risk investments

along with competitive pressures in the reinsurance market from traditional carriers and alternative

capital sources.

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Factors that could lead to a rating downgrade include (i) underwriting and/or investment results

causing a 20% decline in NICO Group’s policyholders’ surplus in a 12-month period, (ii) a decline

in Berkshire’s financial flexibility (for example, total consolidated leverage exceeding 30%, or cash

and equivalents available to Berkshire and NICO Group declining toward $30 billion), or (iii) a rating

downgrade of Berkshire or a major affiliate.
Moody’s has affirmed the following ratings:
National Indemnity Company – insurance financial strength at Aa1;
Columbia Insurance Company – insurance financial strength at Aa1;
Finial Holdings, Inc. – $200 million senior unsecured notes due in 2023 at Baa3.
The rating outlook for these companies is stable.
The principal methodology used in these ratings was Reinsurers Methodology published in

November 2019 and available at

https://www.moodys.com/researchdocumentcontentpage.aspx?

docid=PBC_1187551

. Alternatively, please see the Rating Methodologies page on www.moodys.com

for a copy of this methodology.
Based in Omaha, Nebraska, NICO Group has the largest capital base of any (re)insurance group

in the world. Its diversified operations include personal auto insurance, commercial property/

casualty insurance, and property/casualty and life/health reinsurance. NICO Group reported gross

premiums written of $57 billion and net income of $16 billion in 2020 on a combined statutory basis.

Policyholders’ surplus was $238 billion as of December 31, 2020.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see

the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure

form. Moody’s Rating Symbols and Definitions can be found at:

https://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_79004

.

For ratings issued on a program, series, category/class of debt or security this announcement

provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or

note of the same series, category/class of debt, security or pursuant to a program for which the

ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices.

For ratings issued on a support provider, this announcement provides certain regulatory disclosures

in relation to the credit rating action on the support provider and in relation to each particular credit

rating action for securities that derive their credit ratings from the support provider’s credit rating.

For provisional ratings, this announcement provides certain regulatory disclosures in relation to the

provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent

to the final issuance of the debt, in each case where the transaction structure and terms have not

changed prior to the assignment of the definitive rating in a manner that would have affected the

rating. For further information please see the ratings tab on the issuer/entity page for the respective

issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies)

of this credit rating action, and whose ratings may change as a result of this credit rating action, the

associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach

exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated

entity, Disclosure from rated entity.

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The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no

amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited

Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the

related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in

our credit analysis can be found at

http://www.moodys.com/researchdocumentcontentpage.aspx?

docid=PBC_1288235

.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt

am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No

1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the

Moody’s office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada

Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK.

Further information on the UK endorsement status and on the Moody’s office that issued the credit

rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the

Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory

disclosures for each credit rating.
Bruce Ballentine

VP-Sr Credit Officer

Financial Institutions Group

Moody’s Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Sarah Hibler

Associate Managing Director

Financial Institutions Group

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Releasing Office:

Moody’s Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

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Client Service: 1 212 553 1653

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https://finance.yahoo.com/news/columbia-insurance-company-moody-affirms-221905845.html