A.M. Best Co. has placed under review with positive implications the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” for the members of GUARD Insurance Group (GUARD) (Wilkes-Barre, PA). (See below for a detailed listing of the companies.)
The rating actions follow the announcement by Clal Insurance Enterprises Holdings Ltd. (Clal Insurance), a subsidiary of IDB Holding Corporation Limited (Tel Aviv, Israel), that it has signed an agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc. (Omaha, NE) [NYSE:BRK.A and BRK.B], for the sale of its wholly owned subsidiary, Clal US Holdings, Inc., which owns GUARD. The acquisition price is $221 million in cash and the release of a $48 million guarantee given by Clal Insurance to secure a loan to Clal US Holdings, Inc. from a foreign bank.
Post completion of the acquisition, A.M. Best believes NICO will provide substantial operational and financial support to GUARD. While some execution risks exist in integrating GUARD into the Berkshire Hathaway Inc. organization, it will be a member of a large, diversified, strongly capitalized and highly rated organization and should realize some economies of scale.
The ratings will remain under review until completion of the acquisition and A.M. Best’s further analysis and discussions with management. The acquisition is expected to close by December 2012, subject to necessary regulatory approvals.
The FSR of A- (Excellent) and ICRs of “a-” have been placed under review with positive implications for the following members of GUARD Insurance Group:
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “Catastrophe Analysis in A.M. Best Ratings”; “The Treatment of Terrorism Risk in the Rating Evaluation”; and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Methodology can be found at www.ambest.com/ratings/methodology.
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