Tag: senior

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

provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or

note of the same series, category/class of debt, security or pursuant to a program for which the

ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices.

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

in relation to the credit rating action on the support provider and in relation to each particular credit

rating action for securities that derive their credit ratings from the support provider’s credit rating.

For provisional ratings, this announcement provides certain regulatory disclosures in relation to the

provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent

to the final issuance of the debt, in each case where the transaction structure and terms have not

changed prior to the assignment of the definitive rating in a manner that would have affected the

rating. For further information please see the ratings tab on the issuer/entity page for the respective

issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies)

of this credit rating action, and whose ratings may change as a result of this credit rating action, the

associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach

exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated

entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no

amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited

Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the

related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in

our credit analysis can be found at

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

docid=PBC_1288235

.

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

affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt

am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No

1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the

Moody’s office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada

Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK.

Further information on the UK endorsement status and on the Moody’s office that issued the credit

rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the

Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory

disclosures for each credit rating.
Bruce Ballentine

VP-Sr Credit Officer

Financial Institutions Group

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
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

© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their

licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY’S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT

OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS,

OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND

INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE

SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN

ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME

DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT.

SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR

INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED

BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK,

INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE

VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND

OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS

OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE

QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS

OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO

NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S

CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND

DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR

SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND

PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY

PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND

OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND

UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY

AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE,

HOLDING, OR SALE.
MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS

ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS

AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS,

ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT

DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER

PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT

LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR

OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,

DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR

ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY

MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE

NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED

FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT

IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be

accurate and reliable. Because of the possibility of human or mechanical error as well as other

factors, however, all information contained herein is provided “AS IS” without warranty of any kind.

MOODY’S adopts all necessary measures so that the information it uses in assigning a credit

rating is of sufficient quality and from sources MOODY’S considers to be reliable including, when

appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot

in every instance independently verify or validate information received in the rating process or in

preparing its Publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents,

representatives, licensors and suppliers disclaim liability to any person or entity for any indirect,

special, consequential, or incidental losses or damages whatsoever arising from or in connection

with the information contained herein or the use of or inability to use any such information, even if

MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers

is advised in advance of the possibility of such losses or damages, including but not limited to:

(a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant

financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents,

representatives, licensors and suppliers disclaim liability for any direct or compensatory losses

or damages caused to any person or entity, including but not limited to by any negligence (but

excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt,

by law cannot be excluded) on the part of, or any contingency within or beyond the control of,

MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers,

arising from or in connection with the information contained herein or the use of or inability to use

any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS,

COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF

ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE

BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s

Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and

municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s

Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s

Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from

$1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies

and procedures to address the independence of Moody’s Investors Service credit ratings and credit

rating processes. Information regarding certain affiliations that may exist between directors of MCO

and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and

have also publicly reported to the SEC an ownership interest in MCO of more than 5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, is posted

annually at

www.moodys.com

under the heading “Investor Relations — Corporate Governance —

Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the

Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited

ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136

972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale

clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access

this document from within Australia, you represent to MOODY’S that you are, or are accessing

the document as a representative of, a “wholesale client” and that neither you nor the entity you

represent will directly or indirectly disseminate this document or its contents to “retail clients” within

the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as

to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or

any form of security that is available to retail investors.
Additional terms for Japan only: Moody’s Japan K.K. (“MJKK”) is a wholly-owned credit rating agency

subsidiary of Moody’s Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc.,

a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating

agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization

(“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-

NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated

obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit

rating agencies registered with the Japan Financial Services Agency and their registration numbers

are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including

corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated

by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to

MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging

from JPY125,000 to approximately JPY550,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory

requirements.