Berkshire Hathaway's outlook raised to stable, IDR affirmed at 'AAA' - Fitch |
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Published
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Mon, 17 Dec 2007 05:42
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MUMBAI (Thomson Financial) - Fitch Ratings said it has revised its outlook on Berkshire Hathaway Inc (BRK) to stable from negative and affirmed the company's issuer default ratings (IDR) at 'AAA' and also affirmed the company's senior unsecured notes ratings, and its insurance subsidiaries' 'AAA' insurer financial strength ratings (IFSR).Fitch said the revision in BRK's outlook reflects its view that while BRK continues to be exposed to very high 'key man' risk that threatens the company's long-time financial and operating strategies, the duration over which this risk is likely to manifest itself is uncertain and may exceed the 12-24 month horizon typically covered by the agency's rating outlook.The revision also reflects a reduction in concerns about investigations by the New York Attorney General's office and the Securities and Exchange Commission into non-traditional or loss mitigation insurance products sold by BRK's insurance subsidiaries, as well as a levelling of debt issued by BRK's finance subsidiaries to fund finance subsidiaries.Fitch had revised BRK's outlook to negative in April 2005 largely due to key-man risk associated with Warren Buffett, BRK's long-time chairman and CEO.The ratings on BRK and its insurance subsidiaries reflect the organization's strong capitalization and liquidity, conservative operating strategies, and excellent competitive positioning in key insurance markets.The ratings also reflect a material amount of earnings volatility due to the large portion of the company's earnings derived from (re)insurance subsidiaries, Fitch said. The outlook on BRK's insurance subsidiaries is stable.While BRK has said it plans to hire one or more investment managers to take over Buffett's investment-related activities, Fitch believes that it is unlikely that they will be able to replicate his record of success.Fitch believes that over an extended period, BRK shareholders will require the company to adopt capital, operational, and investment related strategies that more closely resemble those generally employed at other publicly owned companies, and that these changes will place pressure on BRK's very high ratings.TFN.newsdesk@thomson.comans/manCOPYRIGHTCopyright Thomson Financial News Limited 2007. All rights reserved.The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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