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A.M. Best Affirms Credit Ratings of California Insurance Company and Its Affiliates
[October 11, 2018]

A.M. Best Affirms Credit Ratings of California Insurance Company and Its Affiliates

A.M. Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of "aa-" of California Insurance Company (Foster City, CA (News - Alert)), Continental Indemnity Company (Cedar Rapids, IA), Illinois Insurance Company (Cedar Rapids, IA), Texas Insurance Company (Dallas, TX) and Pennsylvania Insurance Company (Cedar Rapids, IA). All companies are collectively referred to as North American Casualty Group (NAC). The outlook of these Credit Ratings (ratings) remains stable.

The ratings reflect NAC's balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

NAC's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), is categorized as strongest and A.M. Best expects it to remain at a similar level in prospective years. Balance sheet strength also benefits from the company's strong liquidity profile, conservative investment strategy, disciplined reserving approach and good financial flexibility provided by its publicly traded ultimate parent, Berkshire Hathaway Inc. [NYSE: BRK.A and BRK.B].

NAC has a track record of strong operating earnings, underpinned by its robust underwriting performance and demonstrated by a five-year average return on equity ratio of 18% (2013-2017). Due to the low interest rate environment and NAC's conservative investment strategy, investment returns remain marginal. A.M. Best expects the company to continue to achieve strong earnings going forward, in line with its past performance.

NAC's business profile remains cocentrated in the workers' compensation line of business, which accounted for 98% of its gross written premiums (GWP) in 2017. Although management has achieved measured growth in other states, California remains the company's primary market (i.e., 46% of 2017 GWP). Following the settlement of a regulatory action by the California Department of Insurance in 2017, NAC has put its EquityComp program into run-off. A.M. Best expects the company's top-line to reduce in 2018, due to the combined effect of the run-off action and persistent challenging competitive conditions in the market. NAC's risk management capabilities are appropriately aligned with its risk profile.

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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