AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa+" (Superior) of Berkshire Hathaway Homestate Insurance Company (Omaha, NE) and its property/casualty affiliates. These companies collectively are referred to as Berkshire Hathaway Homestate Companies (BHHC). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of companies.)

The ratings reflect BHHC's balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. Additionally, these ratings consider the additional financial flexibility and support provided by the group's publicly traded parent and ultimate shareholder, Berkshire Hathaway Inc. (NYSE:BRK).

The ratings also reflect BHHC's consistently excellent risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR). Despite occasional valuation fluctuations in the group's sizeable equity portfolio, BHHC's risk-adjusted capitalization has remained consistently supportive of the strongest overall balance sheet strength assessment. The group's ratings further recognize its historically profitable operating performance, conservative approach to setting loss reserves, strong liquidity metrics and the executive team's successful track record of managing operations. AM Best notes that BHHC's key operating metrics consistently outperform peer benchmarks.

The positive rating factors are offset to a degree by challenging market conditions and BHHC's business profile, which remains somewhat concentrated in the workers' compensation line of business, primarily in California.

A little less than half of BHHC's direct writings are derived from California. This concentration has diminished over time, as the group has seen its California workers' compensation business contract due to heightened competition that has persisted for several years. This decline has been accompanied by the group diversifying its workers' compensation book outside of California and its strong growth in other business classes. These other classes include commercial auto and property lines, which now comprise roughly half of total premiums and have combined to produce consistent underwriting profits for the past several years. Overall, BHHC has produced underwriting profits each year for more than a decade. Nevertheless, the large block of California workers' compensation business still exposes the group to a heightened level of regulatory, judicial, legislative and competitive risks relative to its peers.

The group's long-tail focus also exposes its balance sheet strength to potential reserve volatility resulting from the high inflationary environment and reinforces the need for BHHC to maintain its historically prudent reserving practices. AM Best notes that favorable reserve development has been consistently and significantly additive to earnings every year for more than a decade, and that any meaningful diminishment or reversal of this favorable trend could pressure the group's operating performance.

An additional offsetting rating factor is the risk associated with a large investment allocation in equity securities, which remains a potential source of volatility in earnings and capital appreciation.

The FSR of A++ (Superior) and the Long-Term ICR of "aa+" (Superior) have been affirmed with a stable outlook for Berkshire Hathaway Homestate Insurance Company and its following property/casualty affiliates:

Cypress Insurance Company (San Francisco, CA)
Oak River Insurance Company (Omaha, NE)
Redwood Fire and Casualty Insurance Company (Omaha, NE)
BHHC Special Risks Insurance Company (North Liberty, IA)
Continental Divide Insurance Company (Denver, CO)

This press release relates to Credit Ratings that have been published on AM 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 AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Patrick Cyphers

Financial Analyst

+1 908 882 1719

patrick.cyphers@ambest.com

Steven M. Chirico

Director

+1 908 882 1694

steven.chirico@ambest.com

Christopher Sharkey

Associate Director, Public Relations

+1 908 882 2310

christopher.sharkey@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 882 2318

al.slavin@ambest.com

AM Best Affirms Credit Ratings of Berkshire Hathaway Homestate Insurance Company and Its Affiliates