08 April 2009

Berkshire Downgraded from AAA by Moody's

And then there were four (US companies left with an AAA credit rating).

Moody's strips Berkshire Hathaway of top rating
by Karen Brettell
Wednesday April 8, 2009, 6:01 pm EDT

NEW YORK (Reuters) - Moody's Investors Service on Wednesday cut its credit ratings on Berkshire Hathaway Inc. from the top Aaa, saying the recession and investment losses at its insurance operations has reduced their ability to support Berkshire's funding needs.

Moody's cut Berkshire to Aa2, the third highest investment grade, and cut its ratings on Berkshire's reinsurance subsidiary National Indemnity Co, and its bond insurance arm Berkshire Hathaway Assurance Corp, to Aa1, the second highest investment grade.

The outlook for all the ratings is stable, indicating an additional rating change is not anticipated over the next 12-to-18 months.

Falling stock prices have reduced the value of National Indemnity's investment portfolio, in turn weakening its capital cushion relative to its insurance and investment exposures, Moody's said in a statement.

Other, non-insurance businesses at the company have also seen "a meaningful drop in earnings and cash flows, particularly for businesses tied to the US housing market, construction, retailing or consumer finance," Moody's said...

The loss of Berkshire's top rating leaves only four U.S. companies rated the top investment grade by Moody's.

The company's bond insurance arm Berkshire Hathaway Assurance had been the only insurer of municipal bonds to have retained its top credit rating, although it has not been a major player in insuring primary deals.

The downgrade leaves Standard & Poor's as the only rating agency still ranking Berkshire AAA. S&P changed its outlook on the company to negative on March 25, indicating a cut from AAA is more likely.

Fitch ratings cut Berkshire to AA, the third highest investment grade, on March 12.