Best Affirms FSR for GEICO

March 9, 2006

A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of “aaa” of Government Employees Group (GEICO) and its property/casualty insurance operating subsidiaries.

A.M. Best has also affirmed the debt rating of “aaa” of the immediate holding company, GEICO Corporation’s existing debt securities. All ratings have a stable outlook.

The ratings reflect GEICO’s superior financial strength, strong operating performance, brand name recognition and market position as one of the top five personal automobile writers in the United States. These strengths are modestly offset by GEICO’s above average investment leverage, as well as its exposure to potential regulatory issues in several of its larger states.

GEICO’s strong operating results reflect a considerable underwriting expense advantage, driven by its direct distribution business model, as well as its favorable loss experience in recent years. Overall returns also benefit from its consistent and stable stream of investment income. When combined with its capital gains, GEICO has generated significant capital over the last five years, which has supported steady growth in net premiums written and enabled it to declare substantial dividends.

Furthermore, GEICO maintains a strategic advantage due to its leadership position in the government and military employee market, as well as an excellent reputation for providing quality service. GEICO also benefits from a strategic alliance with an unaffiliated insurer, as well as ownership of an independent agency that provides the ability to supplement its automobile products with homeowners’ coverage without assuming the corresponding catastrophe risk.

The ratings also recognize the considerable resources and financial strength of GEICO’s ultimate parent, Berkshire Hathaway Inc., whose financial profile includes approximately $91 billion of stockholders’ equity, minimal debt and a long history of strong profitability. Moreover, GEICO Corporation maintains modest financial leverage and strong cash flows to fund fixed charges.

GEICO’s negative rating factors include above average investment leverage derived from its significant allocation of invested assets to unaffiliated common stock. However, its risk-adjusted capitalization and historic success in managing its portfolio partially mitigate this risk.

In addition, GEICO maintains a modest geographic concentration that exposes it to legislative changes and judicial decisions as its top five states account for approximately one-half of its direct premiums written. However, this risk is largely mitigated by its geographic spread throughout the rest of the country and management’s proven ability to quickly adapt to changing market conditions.

The FSR of A++ (Superior) and ICRs of “aaa” have been affirmed for Government Employees Group and its following property/casualty insurance operating subsidiaries:

Government Employees Insurance Company
GEICO Indemnity Company
GEICO Casualty Company
GEICO General Insurance Company.

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