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Berkshire Units' Ratings Affirmed on Strong Profitability
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Berkshire Hathaway Inc.’s (BRK.B - Free Report) subsidiary National Indemnity Company and its units were recently affirmed financial strength rating (FSR) of A++ (Superior) and the issuer credit ratings (ICR) of “aaa” by credit rating giant A.M. Best. The rating was affirmed as stable.
The affirmation of its investment grade rating reflects the company’s strong operating performance. Its share price also tells a similar story. Year to date, the company has added 25.7% higher than the gain of 22.8% generated by the Zacks categorized Property and Casualty Insurance industry. The company has tremendously beaten the return of 10.6% logged by the S&P 500 Index over the same time frame.
The superior performance in 2016 was primarily attributed to high returns generated from its equity investments, though the company’s insurance underwriting operations and railroad business generated lower earnings for the first nine months of 2016. It was partly offset by higher earnings contribution from its utilities and energy business, and manufacturing, service and retailing businesses.
Coming back, another of the company’s affiliates – Finial Reinsurance Company – was affirmed the FSR of A- (Excellent) and the ICR of “a-”. Concurrently, A.M Best reiterated the ICR of “bbb-” and the issue rating of “bbb-” of Finial Holdings Inc. Furthermore, Berkshire Hathaway Life Insurance Company of Nebraska was affirmed with FSR of A++ (Superior) and the ICR of “aa+” along with the FSR of A+ (Superior) and the ICR of “aa-” of First Berkshire Hathaway Life Insurance Company. The outlook of these ratings also remains stable.
The rating action on National Indemnity’s takes into account its capability to consistently produce superior operating performance alongside maintaining a strong risk-adjusted balance sheet. It also boasts a global market profile. Also, the company’s disciplined underwriting practice along with sufficient financial flexibility has helped it to deal with a different underwriting cycle, positing it well to take advantage of unique market opportunities. Moreover, National Indemnity boasts a superior market position, which should enable it to outperform in terms of underwriting results.
Investment returns owing to strategies adopted by Warren Buffett have enhanced the subsidiary’s operating performance.
However, National Indemnity’s exposure to higher levels of equity investments than most of its peers may result in volatile results, which may offset these positives.
Also, factors like lack of transparency about Warren Buffett’s successor might affect ratings. This is because uncertainty looms over the firm’s future direction as it is controlled and directed by Buffet himself. However, Buffett’s practice of allowing managers of each business to run their units independently without much interference dilutes the uncertainty of the business.
Rating affirmations or upgrades from credit rating agencies play an important part in instilling investor confidence in the stock as well as in maintaining its creditworthiness in the market. Currently, Berkshire Hathaway carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the finance sector are Alleghany Corporation , First American Financial Corp. (FAF - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) . While Alleghany and Arch Capital carry a Zacks Rank # 1 (Strong Buy), First American carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany Corporation deals in Property & Casualty reinsurance and insurance businesses in the U.S. and internationally. The company recorded positive surprises in three of the last four quarters with an average beat of 20.52%.
First American Financial is a leading provider of title insurance and settlement services to the real estate and mortgage industries in the U.S. The company beat estimates in all the trailing four quarters with an average beat of 14.32%
Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It posted positive surprises in all of the last four quarters with an average beat of 9.27%.
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Berkshire Units' Ratings Affirmed on Strong Profitability
Berkshire Hathaway Inc.’s (BRK.B - Free Report) subsidiary National Indemnity Company and its units were recently affirmed financial strength rating (FSR) of A++ (Superior) and the issuer credit ratings (ICR) of “aaa” by credit rating giant A.M. Best. The rating was affirmed as stable.
The affirmation of its investment grade rating reflects the company’s strong operating performance. Its share price also tells a similar story. Year to date, the company has added 25.7% higher than the gain of 22.8% generated by the Zacks categorized Property and Casualty Insurance industry. The company has tremendously beaten the return of 10.6% logged by the S&P 500 Index over the same time frame.
The superior performance in 2016 was primarily attributed to high returns generated from its equity investments, though the company’s insurance underwriting operations and railroad business generated lower earnings for the first nine months of 2016. It was partly offset by higher earnings contribution from its utilities and energy business, and manufacturing, service and retailing businesses.
Coming back, another of the company’s affiliates – Finial Reinsurance Company – was affirmed the FSR of A- (Excellent) and the ICR of “a-”. Concurrently, A.M Best reiterated the ICR of “bbb-” and the issue rating of “bbb-” of Finial Holdings Inc. Furthermore, Berkshire Hathaway Life Insurance Company of Nebraska was affirmed with FSR of A++ (Superior) and the ICR of “aa+” along with the FSR of A+ (Superior) and the ICR of “aa-” of First Berkshire Hathaway Life Insurance Company. The outlook of these ratings also remains stable.
The rating action on National Indemnity’s takes into account its capability to consistently produce superior operating performance alongside maintaining a strong risk-adjusted balance sheet. It also boasts a global market profile. Also, the company’s disciplined underwriting practice along with sufficient financial flexibility has helped it to deal with a different underwriting cycle, positing it well to take advantage of unique market opportunities. Moreover, National Indemnity boasts a superior market position, which should enable it to outperform in terms of underwriting results.
Investment returns owing to strategies adopted by Warren Buffett have enhanced the subsidiary’s operating performance.
However, National Indemnity’s exposure to higher levels of equity investments than most of its peers may result in volatile results, which may offset these positives.
Also, factors like lack of transparency about Warren Buffett’s successor might affect ratings. This is because uncertainty looms over the firm’s future direction as it is controlled and directed by Buffet himself. However, Buffett’s practice of allowing managers of each business to run their units independently without much interference dilutes the uncertainty of the business.
Rating affirmations or upgrades from credit rating agencies play an important part in instilling investor confidence in the stock as well as in maintaining its creditworthiness in the market. Currently, Berkshire Hathaway carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the finance sector are Alleghany Corporation , First American Financial Corp. (FAF - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) . While Alleghany and Arch Capital carry a Zacks Rank # 1 (Strong Buy), First American carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany Corporation deals in Property & Casualty reinsurance and insurance businesses in the U.S. and internationally. The company recorded positive surprises in three of the last four quarters with an average beat of 20.52%.
First American Financial is a leading provider of title insurance and settlement services to the real estate and mortgage industries in the U.S. The company beat estimates in all the trailing four quarters with an average beat of 14.32%
Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It posted positive surprises in all of the last four quarters with an average beat of 9.27%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>