A.M. Best Affirms National Indemnity Group

November 25, 2003

A.M. Best Co. has affirmed the financial strength rating of “A++” (superior) of National Indemnity Group, a subsidiary of Omaha, Neb.-based Berkshire Hathaway Inc.

The rating applies to National Indemnity Company and its eight affiliated non-life and life insurance companies that support the group’s operating profile. The outlook is stable.

The rating reflects the group’s core importance within the Berkshire Hathaway collection of insurance and non-insurance organizations; its superior risk-adjusted capitalization; premier market profile; superior if irregular earnings stream; strong investment base; astute management and extraordinary liquidity. These strengths are demonstrated in the group’s significant underwriting capacity in both reinsurance and primary lines of business, unsurpassed claims paying ability and the operating flexibility to respond opportunistically to new and emerging market risks.

Management’s conservative risk management strategy has enabled the group to absorb significant adversity while maintaining ample capacity to support its ongoing business risks. Although the group writes “super cat” and terrorism coverage, its largest per occurrence catastrophe exposure is manageable at approximately 18 percent of statutory surplus due to its disciplined underwriting approach.

The group has also demonstrated the underwriting expertise to achieve favorable underwriting returns over the long term, despite volatility in underwriting performance stemming from high severity losses and irregular earned premiums derived from large retroactive reinsurance or single risk contracts. On an economic basis, the group has generated excellent total returns on revenue, averaging 11.0 percent over the past 10 years, benefiting from a business model predicated by low cost “float” generated by the group’s long-term reinsurance contracts.

Modestly offsetting these positive factors is the group’s considerable common stock leverage, which is concentrated in a limited number of large publicly rated U.S. corporations. Management’s long-standing investment philosophy has been to maximize its average annual rate of return through a buy and hold strategy of a limited number but diversified group of well-developed and stable companies. Such investments have generated significant realized and unrealized capital gains over the long term, contributing to the group’s superior level of capitalization.

Best said believes National Indemnity could currently withstand the compound effect of a mega-catastrophe and moderate devaluation in its invested assets while still maintaining its superior financial strength.

The financial strength rating of A++ (Superior) has been affirmed for the following members of National Indemnity Group:

— National Indemnity Co.
— Columbia Insurance Co.
— National Fire and Marine Insurance Co.
— National Liability & Fire Insurance Co.
— National Indemnity Company of Mid-America
— National Indemnity Company of the South
— Wesco-Financial Insurance Co.
— Berkshire Hathaway Life Insurance Co. of Nebraska
— BHG Life Insurance Co.

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