In these economic times, even Warren Buffett can’t qualify for the best credit rating.
Moody’s Investors Service on Wednesday stripped away the triple-A rating of Berkshire Hathaway, the conglomerate and investment vehicle run by Buffett, citing the economic pressures on the firm.
The news is yet another sign that, even with all of Buffett’s investing prowess and business savvy, even the man that investors regard as the Oracle of Omaha cannot avoid the tremors coursing through the markets.
The ratings downgrades affect Berkshire as a whole as well as a wide swath of its insurance subsidiaries, including its flagship National Indemnity, as well as other units like the auto insurer Geico and the municipal bond insurer Berkshire Hathaway Assurance.
“Today’s rating actions reflect the impact on Berkshire’s key businesses of the severe decline in equity markets over the past year as well as the protracted economic recession,” Bruce Ballentine, Moody’s lead analyst for Berkshire, said in a statement.
Moody’s said that National Indemnity’s capital cushion fell 22 percent last year to US$27.6 billion, as the market drop eroded the value of its stock holdings. The thinning of that regulatory capital continued through early last month, the agency said.
Though another ratings agency, Fitch Ratings, had downgraded the company last month, Moody’s is bigger and more widely cited.
The parent company of Moody’s is 20 percent owned by Berkshire, but Buffett has not exerted any control over the company. Standard & Poor’s, the other large agency, warned last month that it might also trim its Berkshire ratings.
Moody’s said that Berkshire’s finances strongly support its new, lower credit rating and that its outlook is stable.