NEW YORK, April 8 (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.
'These extraordinary market pressures have reduced the excess cushion available from National Indemnity and the other affected operations to support potential funding needs of the parent company,' the rating agency added.
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.
(Reporting by Karen Brettell;) Keywords: BERKSHIRE RATING/MOODYS (karen.brettell@thomsonreuters.com; +1 646 223 6274; Reuters Messaging: karen.brettell.reuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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.
'These extraordinary market pressures have reduced the excess cushion available from National Indemnity and the other affected operations to support potential funding needs of the parent company,' the rating agency added.
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.
(Reporting by Karen Brettell;) Keywords: BERKSHIRE RATING/MOODYS (karen.brettell@thomsonreuters.com; +1 646 223 6274; Reuters Messaging: karen.brettell.reuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.