Updated from 2:36 p.m. EDT
Berkshire Hathaway (BRK.A) is in danger of losing its triple-A rating with Standard & Poor's if its capital levels or the value of its equity holdings continue to dwindle.
S&P late Tuesday revised its rating outlook for Berkshire, the Omaha, Neb., insurance and investing firm headed by billionaire investor Warren Buffett, to negative from stable. If the outlook for Berkshire continues to worsen over the next year, S&P could cut the insurer's rating.
"The decline in equity values in 2009 has reduced the statutory capital of the insurance operations, and a preliminary analysis of the group's capital adequacy indicates that the group's capital is no longer redundant at the 'AAA' level," said S&P credit analyst John Iten in a research report.In December, S&P said it would consider downgrading Berkshire's outlook to negative if capital markets continued to weaken, investment-related losses reduced capital below the triple-A level, and the firm was not able to rebuild capital back up to that level within a reasonable time frame. S&P said the time horizon for the outlook is 12 months. If, during that period, a continued downturn in equity values hurts its capital further, or if it appears that the insurance business won't be able to restore its capital back to the triple-A level, then the agency will lower its rating. However, S&P said a downgrade of the insurance company's ratings would likely be a one-level drop. Still, a downgrade by S&P would the be the second for Berkshire this year, after Fitch Ratings reduced the insurer's issuer default rating to double-A-plus from triple-A and its senior unsecured debt rating to double-A from triple-A.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV