CHICAGO -- Fitch Ratings has downgraded Berkshire Hathaway's (BRK.A) triple-A issuer default rating and senior unsecured debt ratings by one notch, saying a top rating isn't appropriate for financial-oriented holding companies in the current volatile market.
The agency affirmed its "AAA" insurer financial strength ratings on the company's insurance and reinsurance subsidiaries, but with a negative outlook.
Fitch said Berkshire's large, unhedged market exposures and potential earnings volatility is "inconsistent with the stability required at the 'AAA' level." The agency said Berkshire's investments in a wide variety of retail, service and manufacturing companies somewhat mitigate this exposure but that diversification isn't enough to warrant a triple-A rating.
Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewelry, restaurants and utility businesses. It has major investments in such companies as Wells Fargo (WB) and Coca-Cola (KO).The agency also said its ratings continue to reflect Fitch's long-standing concerns that Berkshire's fortunes are intimately tied to Chairman Warren Buffett and his investment expertise. Buffett recently released his annual letter to shareholders describing the worst of his 44 years at the helm of Berkshire. The Omaha, Neb.-based company reported sharply lower profit because of its largely unrealized $7.5 billion investment and derivative losses. But Buffett has said he doesn't regret investing $8 billion of Berkshire's money in investment bank Goldman Sachs (GS) and conglomerate General Electric (GE) last fall. The company made several large investments over the past year, reducing its cash on hand to $24.3 billion at the end of 2008.