Author: Minnie Arwood

Rating Action:

Moody’s affirms Berkshire Hathaway’s Aa2 senior debt

rating, stable outlook

10 December 2021

New York, December 10, 2021 – Moody’s Investors Service has affirmed the Aa2 senior unsecured

debt rating and Prime-1 short-term issuer rating of Berkshire Hathaway Inc. (Berkshire, NYSE: BRK)

as well as the ratings on subsidiary debts that are unconditionally and irrevocably guaranteed by

Berkshire (see list below). The rating outlook for Berkshire is stable.
RATINGS RATIONALE
According to Moody’s, the rating affirmation reflects Berkshire’s extraordinarily well capitalized

(re)insurance operations, its highly diversified earnings and cash flow from regulated and non-

regulated businesses, and its conservative financial policy, by which it maintains of a large liquidity

pool and moderate financial leverage. Partly offsetting these strengths are potential earnings

and capital volatility related to the company’s large, concentrated stock investments and its large

individual (re)insurance transactions. Other challenges include enterprise risk management given

the vast business portfolio, and leadership succession given the critical role CEO Warren Buffett has

played in developing Berkshire’s culture and financial performance.
Berkshire reported net operating earnings of $20.2 billion for the first nine months of 2021, up

19{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} versus the prior year period, reflecting strong double-digit increases in the railroad, utilities

and energy, and manufacturing, service and retailing segments, partly offset by a double-digit

decline in the (re)insurance segment. The year-to-date decline in (re)insurance results reflects

lower underwriting income, partly because of higher catastrophe losses, along with slightly lower

investment income. Moody’s expects that Berkshire will benefit from the recovering economy in 2022

and will continue to grow its operating earnings, cash flow and capital base over time.
As of September 30, 2021, Berkshire had consolidated cash and equivalents totaling $149 billion, a

Story continues

majority held within the (re)insurance segment. The company had total borrowings of $115 billion, a

majority issued by the railroad and utilities and energy segments. Consolidated total leverage, which

incorporates all reported debt plus Moody’s adjustments for pensions and leases, was about 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} at

September 30, 2021, within Moody’s rating expectations. Berkshire generates healthy pretax interest

coverage, averaging more than 10 times over the past five years. The company holds at least $30

billion of cash and equivalents at or readily available to the parent to address potential needs or

opportunities.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade of Berkshire’s ratings include (i) meaningful improvement in

standalone credit profiles of major operating units, and (ii) continued holdings of substantial cash and

equivalents at or readily available to the parent company relative to outstanding indebtedness.
Factors that could lead to a rating downgrade include: (i) meaningful deterioration in standalone

credit profiles(s) of one or more major operating units, (ii) a shift towards a less conservative

financial profile (for example, total consolidated leverage exceeding 30{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, or total leverage excluding

railroad, utilities and energy exceeding 15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), (iii) losses from (re)insurance underwriting and/or

investments causing a 15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} decline in shareholders’ equity in a given year, or (iv) a significant

decline in cash and equivalents at or readily available to the parent (for example, declining toward

$30 billion, which management cites as a minimum balance).
Moody’s has affirmed the following ratings:
Berkshire Hathaway Inc. — long-term issuer rating and senior unsecured debt at Aa2, senior

unsecured shelf at (P)Aa2, short-term issuer rating at Prime-1;
Berkshire Hathaway Finance Corporation — backed senior unsecured debt at Aa2, backed senior

unsecured shelf at (P)Aa2;
The Lubrizol Corporation — backed senior unsecured debt at Aa2;
Precision Castparts Corp. — backed senior unsecured debt at Aa2.
The rating outlook for these companies is stable.
The methodologies used in these ratings were Property and Casualty Insurers

Methodology published in September 2021 and available at

https://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_1254163

, and Reinsurers Methodology published

in November 2019 and available at

https://www.moodys.com/researchdocumentcontentpage.aspx?

docid=PBC_1187551

. Alternatively, please see the Rating Methodologies page on www.moodys.com

for a copy of these methodologies.
Based in Omaha, Nebraska, Berkshire is a holding company engaged through subsidiaries in

diversified businesses that fall into four broad segments: (re)insurance; railroad; utilities and

energy; and manufacturing, service and retailing. Berkshire also holds sizable minority interests in

several publicly traded firms through its portfolio of common stocks, held mainly by its (re)insurance

subsidiaries. Berkshire generated total revenue of $204 billion, net operating earnings of $20.2

billion, and net income attributable to Berkshire of $50.1 billion for the first nine months of 2021.

The main differences between net income and operating earnings are that net income includes

unrealized gains on stock investments plus a smaller amount of realized investment gains. Berkshire

had total assets of $921 billion and Berkshire shareholders’ equity of $472 billion as of September

30, 2021.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see

the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure

form. Moody’s Rating Symbols and Definitions can be found at:

https://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_79004

.

For ratings issued on a program, series, category/class of debt or security this announcement

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For ratings issued on a support provider, this announcement provides certain regulatory disclosures

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The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

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Financial Institutions Group

Moody’s Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

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Client Service: 1 212 553 1653
Sarah Hibler

Associate Managing Director

Financial Institutions Group

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Releasing Office:

Moody’s Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653

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