...lots of problems for both Life and Casualty businesses. Life insurers are particularly squeezed with annuity contracts that are basically underwater coupled with anemic investment returns on the asset side of the balance sheet.
New York, April 08, 2009 -- Moody's Investors Service has downgraded the insurance financial strength (IFS) rating of National Indemnity Company (National Indemnity) to Aa1 from Aaa and the long-term issuer rating of its ultimate parent, Berkshire Hathaway Inc. (Berkshire -- NYSE: BRKA), to Aa2 from Aaa. The rating agency has also downgraded the IFS ratings of Berkshire's other major insurance subsidiaries to Aa1 from Aaa (see list below). Berkshire's Prime-1 short-term issuer rating has been affirmed. The rating outlook for all of these entities is stable.
"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," said Bruce Ballentine, Moody's lead analyst for Berkshire. For National Indemnity, falling stock prices have reduced its investment portfolio value and, in turn, its capital cushion relative to ongoing insurance and investment exposures. For some of Berkshire's non-insurance businesses, the recession has caused a meaningful drop in earnings and cash flows, particularly for businesses tied to the US housing market, construction, retailing or consumer finance. "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,"